Asymmetric information, adverse selection, and moral hazard all lead to an increase in a bank's
A)default risk.
B)interest rate risk.
C)liquidity risk.
D)foreign exchange risk.

Question

Quizplus · Accepted Answer

Asymmetric information, adverse selection, and moral hazard all increase the probability of default by the borrower, which in turn increases the default risk for the bank. The other options are not directly impacted by these factors.

Asymmetric Information, Adverse Selection, and Moral Hazard All Lead to an Increase