Which of the following suggests that higher interest rates are charged to high risk borrowers?
A)Risk/return tradeoff
B)Compensating balance concept
C)Cost-benefit analysis
D)Direct relationship principle

Question

Quizplus · Accepted Answer

The risk/return tradeoff principle states that higher returns must be offered to compensate for higher risks. In the context of lending, this means that high risk borrowers would be charged higher interest rates to compensate for the higher risk of default.

Which of the Following Suggests That Higher Interest Rates Are