If a Lender Checks Credit Reports on Individuals Before Mailing

question 53

Multiple Choice

If a lender checks credit reports on individuals before mailing out loan offers, it is most likely trying to avoid

• A) moral hazard.
• B) moral dilemma.
• C) adverse selection.
• D) adverse reaction.

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Definitions:

Ask Price

The lowest price a seller is willing to accept for a security or commodity.

Equilibrium Price

The price point where the amount of goods that are offered for sale matches the amount of goods that consumers are willing to buy.

Auction Price

The final price at which an item is sold during an auction, determined by competitive bidding.

Unsecured Debts

Debts that are not backed by an underlying asset, meaning lenders have no collateral to claim in case of default.