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:

Significance Level

A threshold in hypothesis testing that determines the probability of rejecting the null hypothesis when it is actually true, usually denoted by alpha (α).

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The various classifications or categories of restaurants based on factors such as cuisine, service method, and pricing.

Ages

The length of time that an individual, entity, or object has existed, typically measured in years.

P-value

The chance of getting test outcomes that are as drastic as or more than the observed results, given that the null hypothesis holds.