A ________ is when one party in a financial contract has incentives to act in its own interest rather than in the interests of the other party.
A) moral hazard
B) risk
C) conflict of interest
D) financial panic

Question

Quizplus · Accepted Answer

A conflict of interest occurs when one party has personal or financial interests that may influence their actions or decisions in a way that is not aligned with the interests of the other party. This can lead to violations of trust, breaches of fiduciary duty, and other ethical concerns. Moral hazard refers to the risk that one party may take excessive risks or engage in reckless behavior because they are protected from the consequences. Risk is a general term that refers to the probability or likelihood of a loss or other negative outcome. Financial panic is a situation in which there is a sudden and widespread loss of confidence in the financial system, leading to widespread selling and a rapid decline in asset prices.

A ________ Is When One Party in a Financial Contract