Which of the following is an example of a principal/agent relationship?
A)Banks lending money to start-up companies.
B)An investment banker investing the client's money into different securities.
C)Advance booking for a car after watching its promos at a car show.
D)Investing your money in fixed-return deposits and government securities.

Question

Quizplus · Accepted Answer

An investment banker acts as an agent for their client, who is the principal. The investment banker is responsible for investing the client's money into different securities, a classic example of a principal-agent relationship.

The other options do not involve a clear relationship between a principal and an agent. In option A, banks lend money to start-up companies, but there is no clear principal-agent relationship defined. In option C, advance booking for a car after watching its promos at a car show, there is a transaction between a buyer and a seller, but again, there is no clear principal-agent relationship present. In option D, investing your money in fixed-return deposits and government securities is a straightforward investment decision with no clear principal-agent dynamic.

Which of the Following Is an Example of a Principal/agent