Question

Majestic Bank offers loans at various interest rates, depending on the nature of the loan.

Kevin wants to borrow $230,000 for a new home. He promises to pay back the loan in 10 years. Maria also wants to borrow $230,000 for a new home. She promises to pay back the loan in 15 years. Assume Kevin and Maria are equally creditworthy and that the two home mortgages are the same in all other aspects.
If all else is constant, the bank would most likely charge a higher interest rate to (Kevin/Maria) .

Answer 1

Maria

Step-by-step explanation:

Assuming all other factors are held constant, the bank would likely charge a higher interest rate to Maria because she intends to pay back the loan after a longer period of time than Kevin.

We need to remember the bank makes a profit from loans issued out to ist debtors, so a longer-term loan would result in higher interest rates for the party involved.