Three factors that cause interest rates among different financial instruments to vary are
A)default risk, expected inflation, and taxability.
B)default risk, current inflation, and taxability.
C)default risk, maturity, and taxability.
D)default risk, expected inflation, and maturity.

Question

Quizplus · Accepted Answer

The three factors that cause interest rates among different financial instruments to vary are default risk, maturity, and taxability. Default risk refers to the likelihood that a borrower will default on their loan, which affects the interest rate they are charged. Maturity refers to the length of time until the loan is repaid, which also affects the interest rate. Lastly, taxability refers to whether the interest earned on the investment is taxable, and if so, at what rate. Therefore, option C is the correct answer.

Three Factors That Cause Interest Rates Among Different Financial Instruments