The Way That Lenders Charge a Higher Interest Rate for Loans

question 15

Multiple Choice

The way that lenders charge a higher interest rate for loans assessed to be of higher risk is known as:

• A) risk aversion.
• B) wealth maximisation.
• C) claim dilution.
• D) price protection.

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Definitions:

Social Comparison Theory

The concept that people gauge their own value and societal status by comparing themselves to others.

Present Performance

The current level of achievement or effectiveness in a particular activity or field, often assessed to identify areas for improvement.

Our Behavior

Refers to the range of actions and mannerisms exhibited by individuals, groups, or systems in response to external or internal stimuli.

Group Norm

A set of informal guidelines or rules that members of a group follow, shaping behavior and expectations within that group.