Inherent in all loan process are the presence of
A) moral hazard
B) asymmetric information
C) adverse selection
D) All of the above

Question

Quizplus · Accepted Answer

All of the above options are inherent in the loan process. Moral hazard arises when borrowers have incentives to take on more risk after receiving a loan. Asymmetric information occurs when borrowers have more information about their ability to repay than lenders do. Adverse selection happens when those most likely to produce a negative outcome are the ones who seek out a loan, knowing their risk profile better than the lender.

Inherent in All Loan Process Are the Presence of