BO
Answered
Economists often speak as if there is a single interest rate when in fact there are many interest rates. What four factors explain the differences in these interest rates?
On Jul 05, 2024
The four factors that explain differences in interest rates are: (1)risk-the greater the chance that the borrower will not pay back the loan, the higher the interest rate; (2)maturity-generally, the longer the length of the loan, the higher the interest rate; (3)loan size-the smaller the loan size, the higher the interest rate charged; and (4)taxability-because lenders are interested in their after-tax interest rate, they may purchase the tax-exempt bonds even when they have a lower interest rate.