Answer:
C. both risk and opportunity cost.
Explanation:
Lenders have different interest rates for different clients and loan types. How they arrive at the different interest rates depends on the lender's internal factors. Generally, a lender considers the following in determining interest rates
- The cost of funds being loaned out, whether customer deposits or from the markets.
- The risk of a customer defaulting
- The lender's profit margin
- The cost of administering the loan
The lender's profit margin represents the opportunity cost element. A lender has to consider how many profits other investing options would generate aside from issuing out the loan.
