Which of the Following Reasons for Considering Long-Term Loans Inherently

question 48

Multiple Choice

Which of the following reasons for considering long-term loans inherently more risky than short-term loans is most accurate?

• A)There is a greater chance that a borrower will default in a longer time-frame.
• B)The penalties for closing out a long term loan early make them unattractive to many investors.
• C)Long term loans typically have ongoing costs that accumulate over the life of the loan.
• D)The loan values are very sensitive to changes in market interest rates.

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Definitions:

Moral Obligation

A sense of duty or ethical responsibility not enforceable by law but considered binding in personal or social contexts.

Nominal Consideration

A token amount shown in a contract to indicate that a contract exists, often used to satisfy the legal requirement for a contract to be binding but not intended as a true economic value exchange.

New Car

Refers to a vehicle that has not been previously registered and comes directly from a dealership or manufacturer.

Brother

A male sibling or a man or boy in relation to other sons and daughters of his parents.