Identify the correct statement about the interest rate charged on loans.

Question

Quizplus · Accepted Answer

Financial institutions typically pay a higher rate of interest than governments because they are considered to be riskier borrowers. The other options are incorrect. Borrowers who are considered credit risks are typically charged higher rates of interest, not lower (option A). Personal loans and credit cards are typically unsecured debt, meaning they are not backed by collateral, so interest rates may be higher to compensate for this higher risk (option B). The interest rate generally increases with the duration of a loan, as longer-term loans are considered riskier than shorter-term loans (option D). Borrowers who are considered credit risks are typically charged higher, not zero, rates of interest on personal loans (option E).

Identify the Correct Statement About the Interest Rate Charged on Loans