Which Is Better,a Fixed-Rate Loan or a Variable-Rate Loan

question 111

Multiple Choice

Which is better,a fixed-rate loan or a variable-rate loan?

• A) A fixed-rate loan, because the lender bears the risk that interest rates will go up
• B) A fixed-rate loan, because they generally cost less than variable-rate loans
• C) A variable-rate loan, because they generally cost less than fixed-rate loans
• D) A variable rate loan, because the lender bears the risk that interest rates will go up
• E) Neither is necessarily better; the choice illustrates the "risk and return go hand in hand" principle.

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