Generally the increment above the prime rate on a floating-rate loan will be higher than on a fixed-rate loan of equivalent risk because the lender bears higher risk with a floating-rate loan.

Question

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The lender bears less interest rate risk with a floating-rate loan because the rate adjusts with market conditions, so the increment above the prime rate is typically lower compared to a fixed-rate loan.

Generally the Increment Above the Prime Rate on a Floating-Rate