Although Debt Contracts Require Less Monitoring Than Equity Contracts,debt Contracts

question 90

Multiple Choice

Although debt contracts require less monitoring than equity contracts,debt contracts are still subject to ________ since borrowers have an incentive to take on more risk than the lender would like.

• A)moral hazard
• B)agency theory
• C)diversification
• D)the "lemons" problem

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Definitions:

Forces and Energies

The physical entities or components responsible for causing motion, changes, or stability in physical systems.

Sociobiology

A field that explores the biological underpinnings of social behavior across species, often looking at how evolutionary processes influence social structures and behaviors.

Gender and Sexuality

Interrelated concepts where gender refers to roles, behaviors, activities, expectations, and societal norms associated with being male or female, and sexuality concerns a person’s sexual orientation, preferences, and identity.

Society

A group of individuals involved in persistent social interaction, or a large social group sharing the same geographical or social territory, typically subject to the same political authority and dominant cultural expectations.