Quiz_9 - Question1 10/10points

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Question 1 10 / 10 points
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If borrowers with the most risky investment projects are more likely to seek bank loans than borrowers with the  safest investment projects, banks face the problem of a) moral  hazard. b) adverse  credit risk. c) adverse  selection.  d) conflict of  interest. Question 2 10 / 10 points From the standpoint of _________, specialization in lending is surprising but makes perfect sense when one considers the  _________ problem. a) moral hazard;  diversification  b) diversification;  moral hazard  c) adverse  selection;  diversification  d) diversification;  adverse  selection  Question 3 10 / 10 points Banks attempt to screen good from bad credit risks to reduce the incidence of loan defaults. To do this, banks a) write restrictive covenants into  loan contracts. b) expend resources to acquire  accurate credit histories of  their potential loan customers. 
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Quiz_9 - Question1 10/10points

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