Multiple Choice
When capital is used as a screening device in conjunction with interest rate, a high risk borrower chooses a contract with__________ , while a low risk borrower chooses the one with_______ .
A) high capital-high interest rate, low capital-low interest rate
B) low capital-low interest rate, high capital-high interest rate
C) high capital-low interest rate, low capital-high interest rate
D) low capital-high interest rate, low capital-low interest rate
E) low capital-low interest rate, high capital-low interest rate
Correct Answer:
Verified
Correct Answer:
Verified
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