What your colleague considers a low risk loan.

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A colleague tells you that he can get a business loan from the bank, but the rates seem very high for what your colleague considers a low risk loan.

a. Give an adverse selection explanation for this, and offer advice to your friend on how to solve the problem.

b. Give a moral hazard explanation for this, and offer advice to your friend on how to solve the problem.

Reference no: EM13184763

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