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:

Fostering

The act of temporarily taking care of a child in place of the child's biological parents, often within a legal or social service framework.

Generativity

Pertains to a stage in adult development where an individual seeks to guide the next generation, often through parenting, teaching, or mentorship.

Childless People

Individuals or couples who do not have children, either by choice or due to circumstances.

Ego-Resiliency

An individual's ability to adapt flexibly and recover from stress or adversity, related to a healthy sense of identity and self.