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You have recently been appointed as a lending officer in the commercial division of a major bank. The bank is concerned about lending in the
You have recently been appointed as a lending officer in the commercial division of a major bank. The bank is concerned about lending in the current economic environment, where there has been an economic downturn. Required: (Please label your responses as 1), 2).) 1) Please identify all the agency problems the bank should be concerned with. (2/10) 2) Please explain how covenants in debt agreements and accounting information can be used to reduce each of those agency problems respectively. (8/10) You have recently been appointed as a lending officer in the commercial division of a major bank. The bank is concerned about lending in the current economic environment, where there has been an economic downturn. Required: (Please label your responses as 1), 2).) 1) Please identify all the agency problems the bank should be concerned with. (2/10) 2) Please explain how covenants in debt agreements and accounting information can be used to reduce each of those agency problems respectively. (8/10)
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