Interest rates that firms face depend on:

Question

Quizplus · Accepted Answer

All three factors - riskiness of the loan, duration of the loan, and costs of administering the loan - can affect the interest rate that firms face. A loan with a higher risk of default will typically have a higher interest rate to compensate the lender for the increased risk. Longer-term loans may also have higher interest rates to reflect the greater uncertainty about future economic conditions. Additionally, lenders may charge higher interest rates to cover the administrative costs of originating and servicing the loan. Therefore, option D, all of the above, is the correct answer.

Interest Rates That Firms Face Depend On