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15 May, 12:26

A business owner applies for a bank loan to launch a fairly low-risk project. After receiving the loan, she cancels the low-risk project and instead uses the borrowed funds for a high-risk venture. This is an example of

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  1. 15 May, 12:32
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    Moral hazard

    Explanation:

    The moral hazard refers to the situation in which the person has the benefit to increase the risk as it does not bear or suffered the whole risk

    According to the given situation, it is mentioned that the business owner canceled the low risk project and used the borrowed funds for taking high risk in the venture after loan receiving

    This situation represents the moral hazard scenario
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Home » Business » A business owner applies for a bank loan to launch a fairly low-risk project. After receiving the loan, she cancels the low-risk project and instead uses the borrowed funds for a high-risk venture. This is an example of
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