What is the advantage of a variable-interest loan?
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Borrower can capitalize on a reference rate decrease
Reduces the total interest payments
Protects the borrower from rising interest rates
Makes it easier for the borrower to plan for future payments
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Interest rate futures are used to hedge against the risk that interest rates will move in an adverse direction, causing a cost to the company. For example, borrowers face the risk of interest rates rising.
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Reduces the total interest payments
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