Frank West Wants to Borrow Money for Three Years to Purchase

question 21

Multiple Choice

Frank West wants to borrow money for three years to purchase a new boat. 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:

Jurisdiction

The official power to make legal decisions and judgments, often defined by geographic area or the type of case.

Convenience Stores

Retail businesses that sell a limited range of everyday items such as groceries, snack foods, and sundries, and are often open for extended hours.

Self-Incrimination

The act of exposing oneself to prosecution by being forced to respond to questions or by providing evidence.

Criminal Activity

Conduct that violates the law and is punishable by the state through fines, imprisonment, or other penalties.