Asked by
emily trevino
on Dec 04, 2024
Verified
Which of the following is NOT an example of moral hazard in business?
A) A bank buys risky mortgage securities because they believe the government will provide a bail-out if the investment performs badly.
B) A firm uses venture capital to speculate in the commodity futures market.
C) A firm does not hire adequate security protection for its warehouse after it pays for insurance on the property.
D) Firms with the large debt problems are more likely to apply for bank loans than financially stable firms.
Moral Hazard
The situation where one party is more likely to take risks because the negative consequences of the risk will be borne by another party.
Commodity Futures Market
A financial exchange where people can trade commodity futures contracts, which are agreements to buy or sell a specified amount of a commodity at a set price at a future date.
- Acquire insight into the principle of moral hazard and its consequences within diverse business scenarios, such as in the fields of lending and insurance.
Verified Answer
BE
Learning Objectives
- Acquire insight into the principle of moral hazard and its consequences within diverse business scenarios, such as in the fields of lending and insurance.