Requiring Collateral Reduces the Probability of Default by Making High-Risk

question 49

Multiple Choice

Requiring collateral reduces the probability of default by making high-risk borrowers less likely to apply for a loan, which reduces:

• A)adverse selection.
• B)moral hazard.
• C)interest rate risk.
• D)bank panics.

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Definitions:

Reported Type

The category or specific kind of something that has been disclosed or documented, often referring to data or incidents.

Upsetting

Causing distress, disappointment, or discomfort; an emotional state or reaction to an unfavorable situation.

Dangerous

Possessing the potential to cause harm, injury, or risk to safety.

Intimate Terrorism

A form of domestic violence characterized by one partner exerting control over the other through fear, threats, and aggression.