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 only go up.
The interest rate can fall below 0.
The rate can only go down.
The rate can go up or down, depending upon the index it is tied to.
The correct response is:
The rate can go up or down, depending upon the index it is tied to.
The correct response is: "The rate can go up or down, depending upon the index it is tied too."
Variable-rate loans, also known as adjustable-rate loans, have an interest rate that is tied to a specific index, such as the prime rate or the London Interbank Offered Rate (LIBOR). The interest rate on these loans can fluctuate periodically, typically based on changes in the index. If the index increases, the interest rate on the variable-rate loan will also increase, causing the borrower's payment to rise. Conversely, if the index decreases, the interest rate and payment on the loan will decrease. This means that the rate can go up or down, depending on the changes in the index.