Frank West Wants to Borrow Money for Three Years to Purchase

Multiple Choice

Frank West wants to borrow money for three years to purchase a new boat. He has been offered a seven percent fixed rate loan and also a variable rate loan that has an initial rate of five percent. By choosing the variable rate loan, Chuck is reducing the lender's risk by:

A) sharing the interest rate risk.
B) increasing his monthly payments.
C) taking a larger stake in the asset he is purchasing.
D) repaying the loan over a faster period of time.
E) pledging collateral.