Lenders Generally Want a Higher Interest Rate to Compensate Them

question 38

Multiple Choice

Lenders generally want a higher interest rate to compensate them when loans stretch over a longer period because:

• A) the opportunity cost increases over time.
• B) there's more uncertainty about potential future investment opportunities.
• C) lenders want to be compensated for being unable to get their money back quickly.
• D) All of these are true.

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Definitions:

Financial Decision Making

The process of making choices related to finance, such as investments, budgeting, and funding, based on analyses and strategies.

Recording

The process of entering financial transactions and other information related to business operations into the accounting system.

Owner's Equity

After settling all obligations, the balance of an entity's assets stands as a representation of the shareholder or owner's equity.

Additional Investments

Funds or assets that an investor or business owner contributes to a business beyond the initial investment, to support operations or expansion.