Collateral requirements lessen the consequences of ________ because th

Collateral requirements lessen the consequences of ________ because the collateral reduces the lender’s losses in the case of a loan default and it reduces ________ because the borrower has more to lose from a default.

A) adverse selection; moral hazard
B) moral hazard; adverse selection
C) adverse selection; diversification
D) diversification; moral hazard

ANSWER

A