A risky borrower can pay a lower interest rate if:
A)she invests the amount in a profitable business.
B)she can assure the lender of a low inflation rate.
C)she makes a promise to repay within a short interval.
D)she can arrange for a collateral.

Question

Quizplus · Accepted Answer

By arranging for a collateral, the borrower is offering an asset that can be seized by the lender in case of default. This reduces the risk for the lender and allows them to offer a lower interest rate despite the borrower being risky.

A Risky Borrower Can Pay a Lower Interest Rate If