Why is the interest rate of long-term loans lower than that of short-term loans? a. the value of money increases with inflation b. the uncertainty is lower c. more borrowers opt for short-term loans d. it is easier to forecast long-term market movements e. borrowers are persuaded to borrow a lesser amount

C.

Explanation:

C. more borrowers opt for short-term loans

Commonly, short-term loans are easier for businesses to qualify for than long-term loans. Those alternative lenders are more inclusive than banks, of which borrowers they approve for their loans.

But without a strict set of requirements for weeding out risky borrowers, in the case of a mortgage default, short-term lenders need another way to protect their interests.For this reason, typically short-term loans come with higher interest rates than long-term loans. The additional costs ensure short-term lenders make money from their loans, even if a borrower defaults.

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