The interest rate charged on secured short-term loans to a corporation is generally higher than that charged on unsecured short-term loans because
A) lenders of secured loans must pay more for their funds.
B) it is costly to negotiate and administer secured loans.
C) secured loans are less risky than unsecured loans.
D) the risk of default is lower on secured loans.

Question

Quizplus · Accepted Answer

Secured loans involve additional costs related to the negotiation and administration of the collateral, which can make them more expensive than unsecured loans.

The Interest Rate Charged on Secured Short-Term Loans to a Corporation