Question

Separating the functions of principals and agents is likely to result in:A. immobility of financial capital.B. diversification of investment risk.C. reduction in agency costs.D. better goal congruence.E. information symmetry.

Answer 1

B. Diversification of investment risk

In investing, the principals are the ones who want to invest and the agents are the people (brokers, etc) who take action on their behalf.