To Minimize the Problem of Moral Hazard When Making a Loan

question 14

Multiple Choice

To minimize the problem of moral hazard when making a loan, a bank requires borrowers to:

• A)sign a covenant.
• B)use their car as collateral.
• C)make the bank the majority owner of the firm.
• D)allow themselves to be monitored by the FDIC.

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Definitions:

Spanish Colonies

Territories around the world that were once part of the Spanish Empire, marked by significant Spanish cultural and political influence from the 15th to the 19th centuries.

Austria-Hungary

A dual monarchy in Central and Eastern Europe between 1867 and 1918, comprised of the Austrian Empire and the Kingdom of Hungary.

Russian Empire

A historical state from the early 18th century until the early 20th century, ruled by emperors or tsars, and known for its expansion and influence in Eastern Europe and Asia.