Banks and FIs Rely on Which of the Following Contractual

question 65

Multiple Choice

Banks and FIs rely on which of the following contractual mechanisms to control the credit risks of lending?

• A)requiring higher interest rate spreads and fees on loans to more risky borrowers.
• B)restricting or rationing loans to more risky borrowers
• C)requiring enhanced seniority for the bank over assets of risky borrowers
• D)diversifying across different types of risky borrowers
• E)all of the above are utilized.

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Definitions:

Deforested Area

Regions where trees have been cut down and removed, leading to loss of forest cover.

Postconventional

A stage of moral development wherein individuals' ethics are governed by internal principles, and they understand that laws and rules may not always be just.

Conventional

Adhering to established norms, standards, or traditions, often seen as typical or traditional.