Why Would a Bank Require a Borrower to Have Collateral

question 50

Multiple Choice

Why would a bank require a borrower to have collateral or a cosigner before agreeing to lend funds?

• A) discourages some borrowers from asking for a loan
• B) reduces risk associated with imperfect information
• C) both act like a service contract in the goods market
• D) complicates the process to discourage risking borrowers

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Definitions:

Performance Success

The degree to which an individual, team, or organization meets or exceeds set objectives or expectations.

Negative Performance Norms

Established patterns of behavior within a group that accept or encourage poor performance or dysfunctional activities.

Team Cohesiveness

Describes the extent to which team members are connected with each other and are motivated to achieve the group’s objectives collectively, enhancing performance and satisfaction.

Positive Performance Norms

Established standards or expectations within a group that encourage productive and beneficial behaviors among its members.