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.

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The detailed answer for the above question is provided below The principalagent issue typically includes a situation where one party the principal del... View the full answer