Lenders generally want a higher interest rate to compensate them when loans stretch over a longer period because:
A) the opportunity cost increases over time.
B) there's more uncertainty about potential future investment opportunities.
C) lenders want to be compensated for being unable to get their money back quickly.
D) All of these are true.

Question

Quizplus · Accepted Answer

All of the reasons listed contribute to lenders wanting a higher interest rate for longer-term loans. As time goes on, there are more potential investment opportunities that may arise, which increases opportunity cost and uncertainty. Additionally, lenders want to be compensated for the risk of not being able to retrieve their money quickly in case of default or other unforeseen circumstances.

Lenders Generally Want a Higher Interest Rate to Compensate Them