Which of the Following Is NOT a Contractual Mechanism Used

question 75

Multiple Choice

Which of the following is NOT a contractual mechanism used by FIs to control credit risks?

• A)Diversifying across different types of risky borrowers.
• B)Requiring higher interest rate spreads for higher risk borrowers.
• C)Requiring more collateral for the bank over the assets of more risky borrowers.
• D)Making lending decisions only in centralized locations.
• E)Placing more restrictive covenants on the actions of more risky borrowers.

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Definitions:

Camping Fee

A charge for the privilege of accessing and using facilities or spaces designated for camping.

National Parks

Protected areas established by governments for the conservation of nature, preservation of wildlife, and recreation, accessible to the public.

Economic Income

The total value of all income received by individuals or corporations, including both realized and unrealized gains.

Net Worth

The total value of all assets owned by an individual or corporation, minus the total value of all liabilities owed at a point in time.