Risky borrowers pay higher interest rates than safer borrowers, in order to persuade lenders to accept the higher risk of default.

Name: Risky borrowers pay higher interest rates than safer borrowers, in order to persuade lenders to accept the higher risk of default.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

This is because lenders want to be compensated for the additional risk they are taking by lending to riskier borrowers, and higher interest rates serve as a way to do this.

Risky Borrowers Pay Higher Interest Rates Than Safer Borrowers, in Order