A bank that wants to monitor the check payment practices of its commercial borrowers, so that moral...

1) A bank that wants to monitor the check payment practices of its commercial borrowers, so that moral hazard can be prevented, will require borrowers to

A) place a bank officer on their board of directors.

B) place a corporate officer on the bank\"s board of directors.

C) keep compensating balances in a checking account at the bank.

D) purchase the bank\"s CDs.

2) Of the following methods that banks might use to reduce moral hazard problems, the one not legally permitted in the United States is the

A) requirement that firms keep compensating balances at the banks from which they obtain their loans.

B) requirement that firms place on their board of directors an officer from the bank.

C) inclusion of restrictive covenants in loan contracts.

D) requirement that individuals provide detailed credit histories to bank loan officers.

3) When a lender refuses to make a loan, although borrowers are willing to pay the stated interest rate or even a higher rate, the bank is said to engage in

A) coercive bargaining.

B) strategic holding out.

C) credit rationing.

D) collusive behavior.