Because of the adverse selection problem loading ... :

a. good credit risks are more likely to seek loans, causing lenders to make a disproportionate number of loans to good credit risks

b. lenders may refuse loans to individuals with high net worth because of their greater proclivity to 'skip town'

c. lenders will write debt contracts that restrict certain activities of borrowers

d. bad credit risks with a willingness to pay higher interest rates will be the majority seeking loans

Question

Business

Shady

4 October, 12:33

Because of the adverse selection problem loading ... :

a. good credit risks are more likely to seek loans, causing lenders to make a disproportionate number of loans to good credit risks

b. lenders may refuse loans to individuals with high net worth because of their greater proclivity to 'skip town'

c. lenders will write debt contracts that restrict certain activities of borrowers

d. bad credit risks with a willingness to pay higher interest rates will be the majority seeking loans

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Kiara Holden · Answer 1

C. lenders will write debt contracts that restrict certain activities of borrowers

In cases like this, the most common is that contracts include restrictive agreements that limit the debtor's behavior, so it is common for him to be asked for periodic financial statements or direct bank deposits to verify the activities and Debtor Performance