Borrowers Taking Out Loans Who Do Not Disclose That They

question 180

Multiple Choice

Borrowers taking out loans who do not disclose that they have little ability to repay the loan is a classic example of _____

• A)the winner's curse.
• B)moral hazard.
• C)negative externalities.
• D)positive externalities.
• E)hidden characteristics.

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Definitions:

Revised Article 3

An updated part of the Uniform Commercial Code dealing with negotiable instruments, such as checks.

Payable to Order

Refers to a financial instrument that is made payable to the specific order of a person or an entity.

Consumer Paper

Consumer paper consists of financial documents and instruments that reflect personal indebtedness, such as loans, mortgages, and credit agreements.

Holder in Due Course

A party that holds a negotiable instrument and has certain rights to payment not subject to defenses.