Other thing equal, a bank expecting interest rates to rise substantially on the near future would...
Other thing equal, a bank expecting interest rates to rise
substantially on the near future
would most prefer to make:
a. three year fixed-rate loan
b. 30 year fixed rate loans
c. floating-rate loans
d. all of the above
e. none of the above
Homework Answers
A floating interest rate, also known as a variable or adjustable rate, refers to any type of debt instrument, such as a loan, bond, mortgage, or credit, that does not have a fixed rate of interest over the life of the instrument.
Thus if the bank expects interest rates to rise, then it would prefer to issue floating-rate loans so that it can earn higher interest rates.
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