A Bank That Wants to Monitor the Check Payment Practices

question 32

Multiple Choice

A bank that wants to monitor the check payment practices of its commercial borrowers,so that moral hazard can be prevented,will require borrowers to

• A) place a bank officer on their board of directors.
• B) place a corporate officer on the bank's board of directors.
• C) keep compensating balances in a checking account at the bank.
• D) do all of the above.
• E) do only A and B of the above.

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Definitions:

Swerve

The act of suddenly changing direction, often to avoid a collision or obstacle.

Not Swerve

A term used in game theory, typically referring to a situation where players in a game or dilemma choose not to change their strategy or direction despite potential conflict.

Nash Equilibrium

A concept in game theory where no player can benefit by changing strategies while the other players keep theirs unchanged.

Optimal Choice

The most efficient or favorable option selected from a set of alternatives, based on criteria or preferences.