Which of the following statements regarding fixed-rate loans is true?
A)Fixed-rate loans are preferable when interest rates are expected to rise.
B)The cost of fixed-rate loans increases with an increase in the market interest rate.
C)The cost of fixed-rate loans decreases with a decrease in the market interest rate.
D)Fixed-rate loans are preferable when interest rates are expected to fall.
E)The interest rates on fixed-rate-loans have periodic adjustment dates, at which time monthly payments are adjusted.

Question

Quizplus · Accepted Answer

Fixed-rate loans are preferable when interest rates are expected to rise because the borrower locks in the interest rate for the duration of the loan, avoiding higher costs associated with rising rates.

Which of the Following Statements Regarding Fixed-Rate Loans Is True