Question

A ___ ___ rate loan is one in which the interest rate charged on the balance fluctuates as market interest rates change, resulting in payments that may change from month to month.

Answer 1

An __ADJUSTABLE__ rate loan is one in which the interest rate charged on the balance fluctuates as market interest rates change, resulting in payments that may change from month to month.

Answer 2

The correct answer is: " a variable interest rate".

The interest rate is the price established by the banks and other lending institutions in exchange for lending money to economic agents. It is usually expressed as a percentage and it is applied to the total amount lent, also denominated the principal of the loan. Economic agents that borrow funds, at the end of the transaction, will have to return the principal of the loan (the total amount borrowed) plus pay the total interest payment.

The interest rate can be either fixed or variable. Fixed interest rates remain constant along the life of the underlying loan while variable rates change according to market fluctuations, affecting interest payments from month to month.