Multiple Choice
Moral hazard is a problem associated with debt and equity contracts arising from
A) the borrower's incentive to undertake highly risky investments.
B) the owners' inability to ensure that managers will act in the owners' interest.
C) the difficulty lenders have in sorting out good credit risks from bad credit risks.
D) all of the above.
E) only A and B of the above.
Correct Answer:
Verified
Correct Answer:
Verified
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