When a Borrower Uses Borrowed Funds to Engage in Activities

question 29

Multiple Choice

When a borrower uses borrowed funds to engage in activities that are detrimental to the profitability of the business venture that was financed, there is a problem of:

• A) adverse selection.
• B) moral hazard.
• C) systematic risk.
• D) risk aversion.

---

Definitions:

Social Competence

The ability to handle social interactions and relationships effectively, including understanding social cues and responding appropriately.

Anger

A strong emotional response to perceived provocation, frustration, or injustice, often characterized by feelings of annoyance, displeasure, or hostility.

Damaging

Causing harm or injury, physically, emotionally, or otherwise, that affects the integrity or value of something or someone.

Negative Results

Outcomes of a test, experiment, or endeavor that do not meet the expected or desired objective, often requiring reassessment or adjustment.