A bank offers credit cards with a 25 percent interest rate, when its competitors' cards have just a 15 percent interest rate.Despite the high rate, the bank finds itself losing money because many of its customers fail to repay the balances on their cards.The bank's losses are most likely to have occurred because of

Question

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The bank's losses are most likely due to adverse selection, meaning that the bank is attracting customers who are more likely to default on their payments, leading to a higher rate of losses. This could be due to the bank's credit approval process or marketing strategies.

A Bank Offers Credit Cards with a 25 Percent Interest