The Problem for Lenders, That a Borrower Has the Incentive

question 32

Multiple Choice

The problem for lenders, that a borrower has the incentive to take chances once the loan is made, is an example of

• A) adverse selection.
• B) moral hazard.
• C) both of the above.
• D) neither of the above.

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Definitions:

Copyrights

Legal rights granted to an author, composer, playwright, publisher, or distributor to exclusively print, publish, perform, film, or record literary, artistic, or musical material.

Finite Intangible Asset

An intangible asset that has a specific life span after which its value diminishes or becomes null.

Amortized

The process of paying off a debt or loan in regular installments over a set period of time, which includes both principal and interest.

Goodwill

An intangible asset that arises when a company acquires another business for more than the fair value of its net identifiable assets.