Which is true of variable-rate loans?(1 point) Responses The rate can go up or down, depending upon the index it is tied too. The rate can go up or down, depending upon the index it is tied too. The rate can only go up. The rate can only go up. The rate can only go down. The rate can only go down. The interest rate can fall below 0.
The rate can go up or down, depending upon the index it is tied to.
The correct answer is: The rate can go up or down, depending upon the index it is tied to. Variable-rate loans have an interest rate that can fluctuate over time, typically based on an index such as the prime rate or the LIBOR. This means that the rate can increase or decrease, depending on changes in the index.
The correct answer is: The rate can go up or down, depending upon the index it is tied to.
Variable-rate loans, also known as adjustable-rate loans, have an interest rate that can change over time. The rate is typically tied to an index, such as the Prime Rate or the London Interbank Offered Rate (LIBOR). If the index increases, the interest rate on the loan will also increase, and if the index decreases, the interest rate will decrease as well. This means that the rate can fluctuate, going up or down, based on changes in the index it is tied to.
It's important to note that while the rate can go both up and down, there may be limits or caps on how much it can change during a specific period or over the life of the loan. These limits help protect borrowers from drastic and sudden rate changes.