The rate of interest change on loans depends largely on
Answer Details
The rate of interest change on loans largely depends on the risk associated with the loan.
When a bank considers giving out a loan, it assesses the level of risk associated with the loan. Factors that can affect the level of risk include the borrower's creditworthiness, the purpose of the loan, the collateral offered, and the prevailing economic conditions.
If the bank determines that the level of risk associated with the loan is high, it will charge a higher interest rate to compensate for the risk. Conversely, if the level of risk is low, the bank may charge a lower interest rate.
The marginal efficiency of capital is a concept in economics that refers to the expected rate of return on investment. While it can affect the level of investment in the economy, it may not directly affect the interest rate on loans.
The prevailing exchange rate and tax rate are factors that can affect the overall economic conditions in the country, but they may not directly influence the interest rate on loans.
Therefore, the risk associated with the loan is the primary factor that determines the rate of interest change on loans. Banks will adjust their interest rates to account for the level of risk associated with the loan, which can vary depending on the borrower and the prevailing economic conditions.