alleryStart learning →A 4% 30-year mortgage, then market rates rise to 6%. Result?
ABank gains from higher yield
BNeither side is affected
CBank loses, consumer wins
DCredit risk falls to zero
Answer & Solution
Correct answer: C. Bank loses, consumer wins
The bank is locked into 4% while the market pays 6%, so it suffers an opportunity cost, which is interest rate risk.
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