Author Question: A credit union faces a(n) ________ problem when it lends funds to a customer to remodel her home and ... (Read 24 times)

B · **on:** Apr 19, 2019

Question 1

An automobile finance company faces an adverse selection problem if borrowers

◦ with a greater chance of defaulting on their car loans get loans from the lender.
◦ with no chance of defaulting on their car loans get loans from the lender.
◦ choose to get their car loans from a source other than the finance company.
◦ choose a 5-year loan as opposed to a 2-year loan.

Question 2

A credit union faces a(n) ________ problem when it lends funds to a customer to remodel her home and the customer then opportunistically uses the funds for a gambling trip to Las Vegas.

◦ adverse selection
◦ moral hazard
◦ external cost
◦ free-rider

tashiedavis420 · **Reply #1 on:** Apr 19, 2019

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