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Moral Hazard Can Contribute to High Bank Leverage in All

Question 71

Multiple Choice

Moral hazard can contribute to high bank leverage in all of the following ways EXCEPT


A) having high capital requirements.
B) bank managers are compensated in part on providing shareholders with high returns on equity.
C) high bank leverage provides shareholders with a potential for a higher return on equity.
D) federal deposit insurance has reduced the incentive of depositors to monitor the behavior of bank managers.

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