If lenders think that a particular borrower might default, they will demand a:
A) higher interest rate to make it worth taking that risk.
B) lower interest rate to make it worth taking that risk.
C) higher interest rate to decrease the amount of risk incurred.
D) lower interest rate to decrease the amount of risk incurred.

Question

Quizplus · Accepted Answer

Lenders demand a higher interest rate when they perceive a borrower as risky, as it compensates them for the increased likelihood of default.

If Lenders Think That a Particular Borrower Might Default, They