Question

Why is the interest rate of long-term loans lower than that of short-term loans?
A.
the value of money increases with inflation
B.
the uncertainty is lower
C.
more borrowers opt for short-term loans
D.
it is easier to forecast long-term market movements

Answer 1

Here is some context. .
Borrowers may borrow funds for short periods or for longer terms. Interest rates on short-term borrowings are typically lower than on long-term borrowings because it is easier to forecast short-term market movements, and the lenders’ risk is lower.

Inflation decreases the value of the money that borrowers repay to lenders. To counter the loss in currency value due to inflation, lenders may add an inflation premium to the interest rates on long-term loans, making them more expensive for borrowers.

Answer 2

What is your choice?

Answer 3

I'm thinking Choice A.

Answer 4

B is incorrect

Answer 5

Let's think this way. You work for a bank and you issue loans. What would you be interested in, in order to get more customers?

Answer 6

Short term loans?..