If Lenders Think That a Particular Borrower Might Default, They

question 146

Multiple Choice

If lenders think that a particular borrower might default, they will demand a:

• A) higher interest rate to make it worth taking that risk.
• B) lower interest rate to make it worth taking that risk.
• C) higher interest rate to decrease the amount of risk incurred.
• D) lower interest rate to decrease the amount of risk incurred.

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Definitions:

Standard Deviation

An indicator that quantifies the spread or diversity among data set values, showing the degree to which these values deviate from the average.

Mean

The arithmetic average of a set of numbers, calculated by adding up all the values and dividing by the number of values.

Pounds

A unit of weight commonly used in the United States and the United Kingdom, equivalent to 0.453592 kilograms.

Standard Deviation

A measure of the amount of variation or dispersion of a set of values, indicating how spread out the values are around the mean.