While the Risks of Construction Lending May Be Less in a Number

question 3

Multiple Choice

While the risks of construction lending may be less in a number of respects than those associated with land acquisition, banks still require a premium in their lending rate as compensation for the risks involved. For construction loans, banks typically require a premium above LIBOR that ranges from:

• A) 0-50 basis points
• B) 50-150 basis points
• C) 150-250 basis points
• D) 250-350 basis points

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Definitions:

Cereal

Grasses cultivated for the edible components of their grain, consisting of the endosperm, germ, and bran; also a common breakfast food made from processed grain.

Milk

A nutrient-rich liquid food produced by the mammary glands of mammals, commonly consumed by humans and used in a variety of dairy products.

Inelastic Demand

A situation where the demand for a good or service is relatively unaffected by changes in price.

Available Substitutes

Alternative products or services that consumers can opt for when faced with changes in price or availability of the original product.