Because of the Adverse Selection Problem

question 19

Multiple Choice

Because of the adverse selection problem

• A)good credit risks are more likely to seek loans causing lenders to make a disproportionate amount of loans to good credit risks.
• B)lenders may refuse loans to individuals with high net worth,because of their greater proclivity to "skip town."
• C)lenders are reluctant to make loans that are not secured by collateral.
• D)lenders will write debt contracts that restrict certain activities of borrowers.

---

Definitions:

Duress

A situation where a person performs an act as a result of violence, threat, or other pressure against the person.

Undue Influence

An illicit means of persuasion that makes someone act against their own interests by the excessive influence of another person.

Executory

A term applied to a contract whose terms have not all been fully performed.

Tutor

A tutor is an individual who provides one-on-one guidance and instruction to a student or learner, often in academic subjects or skills.