A Borrower Who Takes Out a Loan Usually Has Better

question 7

Multiple Choice

A borrower who takes out a loan usually has better information about the potential returns and risk of the investment projects he plans to undertake than does the lender. This inequality of information is called

• A)moral hazard.
• B)asymmetric information.
• C)noncollateralized risk.
• D)adverse selection.

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Definitions:

Planning

The process of defining goals, establishing strategies for achieving those goals, and developing plans to integrate and coordinate activities.

Business Plan

A strategic blueprint that outlines a company's vision, goals, target market, financial projections, and operational plans.

Business Success

The achievement of desired financial and operational goals in a business, often marked by profits, growth, and market share.

Planning

The act of defining a strategy or direction and making decisions on allocating resources to pursue this strategy.