A Bank Usually Treats the Moral Hazard Problem by Using

question 47

Multiple Choice

A bank usually treats the moral hazard problem by using all of the following, except:

• A)Not making loans
• B)Requiring collateral
• C)Requiring down payments
• D)Restrictive covenants

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Definitions:

Stockholders' Equity

The leftover value in a corporation's assets after all obligations are removed, symbolizing the equity held by shareholders.

Par Value

The stated value of a bond, stock share, or coupon as declared by the issuer.

Stockholders' Equity

The residual interest in the assets of an entity that remains after deducting its liabilities, representing ownership interest in a company.

Dividends

Payments made by a corporation to its shareholder members, often derived from the company's profits.