Question

One bank offers a 4% variable rate loan, while a competitor offers a 3% fixed rate loan over the same period. Assuming no other differences between the loans, a customer should choose the fixed rate loan because

A. the interest rate is higher and guaranteed to increase
B.the interest rate is higher but will not increase
C.the interest rate is lower and will not increase
D.the interest rate is lower but is likely to increase

Answer 1

Based on the given scenario above about loan rates offered by different banks, if assuming that there is no other difference between the loans, a customer should choose the fixed rate loan because the interest rate is higher and guaranteed to increase. The answer would be option A. Hope this answers your question.