Chuck Spencer Wants to Borrow Money for Three Years to Purchase

question 8

Multiple Choice

Chuck Spencer wants to borrow money for three years to purchase a new car. He has been offered a seven percent fixed rate loan and also a variable rate loan that has an initial rate of five percent. By choosing the variable rate loan, Chuck is reducing the lender's risk by:

• A) sharing the interest rate risk.
• B) increasing his monthly payments.
• C) taking a larger stake in the asset he is purchasing.
• D) repaying the loan over a faster period of time.
• E) pledging collateral.

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Definitions:

Bureaucratic Organization

A form of organization structured hierarchically, governed by formal rules and regulations, and characterized by specialized roles and impartiality of its members.

Charismatic Personalities

Individuals who possess a natural ability to attract, influence, and inspire others through their charm, communication, and leadership qualities.

Legal Principles

Fundamental guidelines, norms, and standards that form the basis for the creation, interpretation, and enforcement of laws.

Common Sense

A widely held set of beliefs or understanding that people assume to be true without question.