Which Is Better, a Fixed-Rate Loan or a Variable-Rate Loan

Which is better, a fixed-rate loan or a variable-rate loan?

A) a fixed-rate loan, because the lender bears the risk that interest rates will go up
B) a fixed-rate loan, because they generally cost less than variable-rate loans
C) a variable-rate loan, because they generally cost less than fixed-rate loans
D) a variable rate loan, because the lender bears the risk that interest rates will go up
E) Neither is necessarily better; the choice illustrates the "risk and return go hand in hand" principle.

Correct Answer:

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