Different borrowers have different risks of bankruptcy, and bankruptcy is costly to lenders.Therefore, lenders charge higher rates to borrowers judged to be more at risk of going bankrupt.

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This statement is true. Lenders charge higher interest rates to borrowers who they perceive to be at a higher risk of defaulting or going bankrupt. This is because bankruptcy is very costly for lenders, who may not be able to recover their loans in full if a borrower declares bankruptcy. Charging higher rates to riskier borrowers helps lenders to offset the potential losses from bankruptcy.

Different Borrowers Have Different Risks of Bankruptcy, and Bankruptcy Is