A borrower is offered a choice between a fixed rate mortgage and a variable rate mortgage.The variable rate mortgage may be more attractive to the lender if the lender expects:
A)Inflation to decrease
B)The home price to decrease
C)The home price to increase
D)Inflation to increase

Question

Quizplus · Accepted Answer

If the lender expects inflation to increase, the variable rate mortgage becomes more attractive because the interest rate can be adjusted upwards, allowing the lender to earn a higher return in line with inflation.

A Borrower Is Offered a Choice Between a Fixed Rate