Finance
What is 'interest rate risk' in Rhode Island real estate lending?
AThe risk that borrowers will default on their loans
BThe risk that rising interest rates will reduce the market value of existing fixed-rate loans and affect borrowing costs✓ Correct
CThe risk that appraisals will be inaccurate
DThe risk that the property's condition will deteriorate
Explanation
Interest rate risk is the risk that changes in prevailing interest rates will affect the value of fixed-rate loan portfolios (held by lenders) and the affordability of new loans (for borrowers). Rising rates reduce the value of existing fixed-rate loans.
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