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

question 5

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 inflation may fall 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:

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Sample Space

The set of all possible outcomes of a probabilistic experiment.