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.

Question

Quizplus · Accepted Answer

Long-term loans are more sensitive to changes in market interest rates because they are held for a longer period of time, and any fluctuations in interest rates can significantly impact the loan's value. This makes them inherently riskier than short-term loans. The other reasons mentioned (inflation, penalties, ongoing costs) are also factors to consider when evaluating the risk of long-term loans, but they are not as directly related to the loan's value as interest rate sensitivity.

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