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1 August, 12:52

Scott is seeking a loan from his bank for a home improvement project. He receives the loan and then decides to take a special vacation opportunity to Las Vegas and enter a gambling tournament. The bank, as a financial intermediary, is facing a problem of

A. symmetric information.

B. moral hazard.

C. adverse selection.

D. liabilities

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Answers (1)
  1. 1 August, 13:07
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    Answer: Option (B)

    Explanation:

    In discipline such as economics, the situation of moral hazard tends to take place when an individual/party increase their vulnerability to the risk especially when the individual/party is insured, or when the individual takes more risks since other entities are bearing the cost associated with the risks. It may take place where the actions taken by a party may further change to disadvantage of another party once the financial transaction has already been dealt with.
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