Which of the following would be LEAST likely to lower the interest rate that a bank offers a borrower?
A)The expected inflation rate is expected to be low.
B)The borrower is judged to have a low degree of risk.
C)The number of borrowers seeking funds is low.
D)The investment will be for a long period of time.

Question

Quizplus · Accepted Answer

Banks typically charge higher interest rates for long-term investments as there is more uncertainty associated with them. Factors such as low expected inflation rates (A), low risk borrowers (B), and low demand for funds (C) may all lead to lower interest rates as they decrease the risk to the bank. However, the length of the investment (D) is a factor that would increase the risk for the bank and therefore increase the interest rate.

Which of the Following Would Be LEAST Likely to Lower