Which of the following statements is most correct? Which of the following statem

ID: 1196993 • Letter: W

Question

Which of the following statements is most correct?

a. Compared to fixed interest rates, variable rates are riskier for the borrower but less risky for the lender.

b. Compared to fixed interest rates, variable rates are riskier for the lender but less risky for the borrower.

c. Variable rates are equally risky for the lender and the borrower.

d. Variable rate debt never should be used by healthcare organizations because it is too risky.

e. Fixed interest rates are more prevalent when long-term borrowing rates are high.

Fixed-rate financing means the interest rate on your loan does not change over the life of your loan.

Whereas, Variable-rate financing is where the interest rate on your loan can change, based on the prime rate or another rate called an “index.”

The longer the term of the loan, the more risky a variable rate loan can be for a borrower, because there is more time for rates to increase.

Hence option a is most correct.

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