Question

the possibility that a borrower will fail to repay a loan on time and will not be able to repay the loan is known as the
○ interest rate risk.
○ credit risk.
○ liquidity risk.
○ investment risk.

Explanation:

Interest rate risk refers to losses from rate fluctuations. Liquidity risk is inability to meet short-term obligations. Investment risk is loss on investments. Credit risk specifically is the chance a borrower defaults on loan repayment.

Answer:

B. credit risk.