2) X has an opportunity to borrow $100,000 on his credit card at 3% annual percentage...

2) X has an opportunity to borrow $100,000 on his credit card at 3% annual percentage rate (APR) . Should she take the money and invest in a one year Certificate of Deposit (CD) paying 4%?

Yes? No? Maybe? Please support your answer.

4) What is meant by the statement that in a fixed rate loan interest rate risk is on the lender while in a variable rate loan interest rate risk is on the borrower?

5) Give at least one example of a popular secured loan and an unsecured loan. Which is riskier and why?

Solutions

Expert Solution

Yes, Certificate of Deposit (CD) is single payment loan. if X borrow money on credit card repay large amount of money as a principal and interest. Here don't consider interest rate.

Normally lender will adjust and potentially make higher interest rate. so,In federal reserve system the interest rate change it greater than the borrower is pay with fixed rate than lender losses out but with variable rate than the borrower losses.

secured loan - car loan

unsecured loan - personal loans

riskier loan is unsecured loan because unsecured loans normally high interest rate than secured loans.

jeff jeffy answered 2 years ago

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