Q. Interest on a corporate loan compensates the lender for: A. risk only.
B. opportunity cost only.
C. both risk and opportunity cost.

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 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.

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