Customers Who Have Long-Term Relationships with Banks

question 7

Multiple Choice

Customers who have long-term relationships with banks

• A)pose particular problems with respect to adverse selection.
• B)pose particular problems with respect to moral hazard.
• C)often obtain credit at a lower rate or with fewer restrictions.
• D)are more likely to default or violate restrictive covenants.

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Definitions:

Controlling Interest

An ownership interest in a company that gives the holder a majority of voting rights, often allowing for control over the company’s policies and decisions.

Subsidiary

A company that is completely or partially owned and controlled by another company, known as the parent company.

Parent

A company which has control over another company or companies, typically through ownership of a majority of shares.

Senior Entity

A senior entity is a leading or controlling organization in a relationship, often referring to a parent company in a group of companies or the main party in partnerships.