Lenders Require Collateral to

question 57

Multiple Choice

Lenders require collateral to

• A) reduce the risk of default.
• B) control the borrowing firm.
• C) reduce the losses if the borrower defaults.
• D) extend to the borrower an unsecured loan.

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Definitions:

Apples

Edible fruits with a rounded shape and sweet taste, grown on trees in temperate climates worldwide.

Diminishing Marginal Utility

The economic principle stating that as a person consumes more of a good, the satisfaction (utility) gained from consuming each additional unit decreases.

Indifference Curves

Graphs representing combinations of different goods that provide an individual with the same level of satisfaction, showing consumer preferences.

Total Utility

The cumulative satisfaction or value that a person derives from consuming a certain quantity of goods or services.