A Lender Faces A(n) ________ Problem If Borrowers with a Greater

question 44

Multiple Choice

A lender faces a(n) ________ problem if borrowers with a greater chance of defaulting on their loans get loans from the lender.

• A) adverse selection
• B) moral hazard
• C) external cost
• D) free‐rider

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Definitions:

Due Date

The due date is a specific date by which an obligation, such as a payment or task, must be completed.

Note Payable

A written promise to pay a specified amount of money, usually with interest, by a certain date.

Sale of Equipment

A financial transaction involving the disposal of equipment assets in exchange for cash or other compensation.