Which of the following observations concerning floating-rate loans is NOT true?
A. They have less credit risk than fixed-rate loans.
B. They better enable FIs to hedge the cost of rising interest rates on liabilities.
C. They pass the risk of interest rate changes onto borrowers.
D. In rising interest rate environments, borrowers may find themselves unable to pay the interest on their floating-rate loans.
E. The loan rate can be periodically adjusted according to a formula.
Ans: A. They have less credit risk than fixed-rate loans.
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