Long-term interest rates are ___________ than short-term because long-term loans are ___________than short-term loans.
A) lower; safer
B) lower; riskier
C) higher; safer
D) higher; riskier

Question

Quizplus · Accepted Answer

Long-term interest rates are higher than short-term rates because long-term loans are riskier than short-term loans. The longer the term of the loan, the greater the risk that the borrower may default or that inflation may erode the value of the return for the lender. As a result, lenders demand a higher rate of return to compensate for the increased risk.

Long-Term Interest Rates Are ___________ Than Short-Term Because Long-Term Loans