Asked by Ashish Karki on Sep 24, 2024
Verified
Which of the following is true?
A) Borrowers take bigger risks with their money than they would with other peoples' money
B) Borrowers take bigger risks with other peoples' money than they would with their own
C) Borrowers take big risks on investments regardless of whether it is their own money or not
D) Borrowers should not be investing at all
Risks
The possibility of experiencing losses or other adverse outcomes as a result of uncertainties or unexpected events.
Borrowers' Money
Funds that individuals or entities borrow from lenders, which they are obligated to repay, often with interest, over time.
Other Peoples' Money
Refers to investing or spending money that belongs to others, typically implying a responsibility to manage those funds wisely.
- Comprehend the principle of moral hazard and its influence on organizational decision-making.
- Understand the impact of personal investment on loan credibility and the feasibility of projects.
Verified Answer
NS
Nithin Sunny3 days ago
Final Answer :
B
Explanation :
When borrowing money, the borrower is not directly liable for the losses incurred as compared to when it is their own money. Hence, they tend to take more risks with other people's money as the consequences of the risk not paying off are not as severe.
Learning Objectives
- Comprehend the principle of moral hazard and its influence on organizational decision-making.
- Understand the impact of personal investment on loan credibility and the feasibility of projects.