To Reduce Moral Hazard Problems,banks Include Restrictive Covenants in Loan

question 108

Multiple Choice

To reduce moral hazard problems,banks include restrictive covenants in loan contracts. In order for these restrictive covenants to be effective,banks must also

• A)monitor and enforce them.
• B)be willing to rewrite the contract if the borrower cannot comply with the restrictions.
• C)trust the borrower to do the right thing.
• D)be prepared to extend the deadline when the borrower needs more time to comply.

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Definitions:

20/600

20/600 refers to a level of visual acuity where an individual can only see at 20 feet what a person with normal vision can see at 600 feet, indicating severe visual impairment.

Vision at Birth

The initial state of visual capability in newborns, which is limited but improves rapidly during the first few months.

Resistant

The quality of not yielding under pressure or the capacity to withstand something, such as a substance not affected by a chemical.

Avoidant

Referring to a behavior or an attachment style characterized by the desire to avoid closeness or emotional connection with others, often due to fear of rejection or discomfort.