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:

Spearman's "g" Factor

A theory proposed by Charles Spearman that suggests a general intelligence factor underlies individual cognitive abilities, influencing performance on various intellectual tasks.

"g" Factor

A theoretical construct suggesting that a general factor of intelligence underlies individual abilities in logical reasoning, problem-solving, and knowledge acquisition.

Spearman

Charles Spearman was an English psychologist who is best known for his work in statistics and the theory of general intelligence.

Crystallized Intelligence

The ability to use learned knowledge and experience.