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A colleague tells you that he can get a business loan from the bank, but the rates seem very high for what your colleague considers

A colleague tells you that he can get a business loan from the bank, but the rates seem very high for what your colleague considers a low-risk loan.

Give an adverse selection explanation for this and offer advice to your friend on how to solve the problem.

Give a moral hazard explanation for this and offer advice to your friend on how to solve the problem.

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