For each of the possible loan terms the commercial lender might offer, identify what choices by the lender would be the worst for combating the moral hazard problem inFigure.

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The Problem of Moral Hazard in Line-of-Credit Lending: A Game-Theoretic Model of Workouts Potential moral Uncertain business opportunities Terms of loan hazard problem in (possible asset substitution screening projects High Moderate Low risk and return finventory A well-known customer applies for line-of credit extension Large Interest rate High effort in screening projects Principal amount Moderate risk and return Long Liquidity Accepts Term High risk B and return N Crisis Short No crisis nsive Collateral international Refuses expansion) Low effort Minimal Other default risk mitigation mechanisms? L-Lender; B-Known, Reliable Borrower; N-Nature