1) a) b) c) d) For each statement, state whether you believe the statement is true or false. Provide a brief explanation of your reasoning. The principal-agent problem is a reason why direct finance is not a main source of external funds for nonfinancial businesses US businesses rely on nonbank finance for external funds more so than businesses in Germany. Net worth requirements by banks are a tool to prevent adverse selection problems in lending. Collateral requirements by banks are a tool to prevent moral hazard problems in lending.

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