A borrower who has to pay an interest rate of 8% rather than 6% due to risk spread will pay:
A) $20 more in interest annually for every $100 borrowed.
B) 33.3% higher interest in dollar terms.
C) 2% in net interest.
D) less interest in total over the life of the loan.

Question

Quizplus · Accepted Answer

The interest rate increases from 6% to 8%, which is a 2% increase. This 2% increase is 33.3% of the original 6% rate (2/6 = 0.333 or 33.3%).

A Borrower Who Has to Pay an Interest Rate of 8