Interest rate risk is part of the loan commitment contingent risk because of the uncertainty of changes in interest rates before the borrower exercises his option to borrow.

Question

Quizplus · Accepted Answer

Interest rate risk is indeed part of the loan commitment contingent risk because the lender is exposed to the risk of changes in interest rates before the borrower decides to take the loan. This uncertainty makes it difficult for the lender to determine the exact cost of funds, which is why interest rate risk is a major concern.

Interest Rate Risk Is Part of the Loan Commitment Contingent