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Adam and Betsy have both applied for loans from a bank. Adam is seeking to borrow $3,000, and the bank has identified him as a high credit risk. Betsy wishes to borrow $5,000, and the bank has deemed her a low credit risk. Based on this information, which outcome is MOST LIKELY? *

a.Adam's loan will have a higher interest rate than Betsy's because he is more likely to default on the loan.
b.a high credit risk means a high credit score means Adam will get the loan
c.since Betsy wants more her interest rate will be higher
d.a low credit risk means any loan for Betsy

Respuesta :

Answer:

It's a

Explanation:

I have the same question but a is the only answer choice we both have

arshikhan8123

The correct option is a.Adam's loan will have a higher interest rate than Betsy's because he is more likely to default on the loan.

What is a Credit risk?

Credit risk is the possibility of a loss resulting from a borrower's failure to repay a loan or meet contractual obligations. Traditionally, it refers to the risk that a lender may not receive the owed principal and interest, which results in an interruption of cash flows and increased costs for collection.

What are the 3 types of credit risk?

  1. Credit spread risk: Credit spread risk is typically caused by the changeability between interest rates and the risk-free return rate.
  2. Default Risk: When borrowers are unable to make contractual payments, default risk can occur.
  3. Downgrade Risk: Risk ratings of issuers can be downgraded, thus resulting in downgrade risk.

Learn more about credit risk here https://brainly.com/question/14828625

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