You are a banker. You expect interest rates to increase in the future. Do you want...
You are a banker. You expect interest rates to increase in the future. Do you want to make short-term or long term loans to your clients? Explain.
Homework Answers
As bankers, if we expect interest rates to increase in the future, we would make long-term loans to our clients. Because, now with the relative low interest rate we can lock in this rate for the benefit of our clients.
If we make short term loans, then when these loans mature, the interest rates would have increased, and if we make new loans then it would be at higher interest rate.
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