Which of the Following Observations Concerning Floating-Rate Loans Is NOT

question 56

Multiple Choice

Which of the following observations concerning floating-rate loans is NOT true?

• A)They have less credit risk than fixed-rate loans.
• B)They better enable FIs to hedge the cost of rising interest rates on liabilities.
• C)They pass the risk of interest rate changes onto borrowers.
• D)In rising interest rate environments, borrowers may find themselves unable to pay the interest on their floating-rate loans.
• E)The loan rate can be periodically adjusted according to a formula.

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