-Mary is a low-risk applicant for a loan at a bank, while John is a high-risk applicant. If the bank increases the interest rates it charges on loans, _____.

Question

-​Mary is a low-risk applicant for a loan at a bank, while John is a high-risk applicant. If the bank increases the interest rates it charges on loans, _____.

Quizplus · Accepted Answer

When interest rates increase, low-risk applicants like Mary are more likely to leave the market for loans because the cost of borrowing becomes less attractive compared to their perceived risk. High-risk applicants like John might still find it worth to take loans despite higher costs, as they might not have better alternatives.

-​Mary Is a Low-Risk Applicant for a Loan at a Bank

-Mary Is a Low-Risk Applicant for a Loan at a Bank