Robert borrowed $15,000 from Granite Bank, telling the loan officer that he intended to use the money to make repairs to his home. After getting the loan, Robert and his girlfriend immediately took the $15,000 and headed to Las Vegas for a weekend of gambling and entertainment. Which statement best characterizes this principal and agent problem?
A. This is a problem of moral hazard, but it is not a problem of asymmetric information.
B. This is a problem of asymmetric information, but it is not a problem of moral hazard.
C. From the given information, it is correct to say that Robert is a principal and that his girlfriend is an agent.
D. From the given information, it is correct to say that Granite Bank is a principal and that Robert is an agent.
Answer is option D)
The loan agency act as principal
A) is false , bcoz moral hazard is always example of assymetric information
B) is false, bcoz it is problem of moral hazard, since Robert indulged in risky activity after the transaction has taken place
C) is false, since Robert is agent , & his girlfriend is not agent
Robert borrowed $15,000 from Granite Bank, telling the loan officer that he intended to use the...