Lenders generally want borrowers to agree to invest prudently, ...

[waynest]

Lenders generally want borrowers to agree to invest prudently, yet once a loan is made borrowers may use the funds in a highly risky fashion. This leads to the problem of
 
  A) deposit insurance. B) investor selection. C) critical mass. D) moral hazard.

Question 2

In the late 1970s, savings and loans institutions were in financial trouble because they
 
  A) had to pay low interest rates to attract depositors, but were earning low interest rates from past investments.
  B) had to pay low interest rates to attract depositors, but were earning high interest rates from past investments.
  C) had to pay high interest rates to attract depositors, but were earning high interest rates from past investments.
  D) had to pay high interest rates to attract depositors, but were earning low interest rates from past investments.

[raenoj]

Answer to Question 1

D

Answer to Question 2

D

[waynest]

Thanks for the timely response, appreciate it

[phuda]

Gracias!