A bank is trying to decide on how to compensate one of their loan officers (employees who decide what businesses the bank should loan money to). They are considering two different compensation schemes. Scheme A pays the loan officer 10,000 for every loan he gives out. Scheme B pays the loan officer 20,000 for every loan he gives out that does not default and fines him 20,000 for every loan that defaults while he is overseeing it. Suppose that for every loan that does not default the bank gets 40,000 and for every loan that does default the bank loses 40,000. Further, suppose at the end of the year, the loan officer is leaving to pursue this passion for music at which point his loans will become another officer's responsibility. Consider the following hypothetical scenario.

The loan officer is approached by a business that has a 75% chance of default within a year.

Under scheme A, does the bank want its officer to approve the loan? Does the officer approve the loan

a.The bank wants the officer to approve the loan, and the officer approves the loan

b.The bank wants the officer to decline the loan, and the officer approves the loan

c.The bank wants the officer to approve the loan, but the officer declines the loan

d.The bank wants the officer to decline the loan, and the officer declines the loan

Under scheme B, does the bank want its officer to approve the loan? Does the officer approve the loan?

a.The bank wants the officer to approve the loan, and the officer approves the loan

b.The bank wants the officer to decline the loan, and the officer approves the loan

c.The bank wants the officer to approve the loan, but the officer declines the loan

d.The bank wants the officer to decline the loan, and the officer declines the loan