3) When establishing the pricing of a variable (floating) rate loan to a particular client, which of the following factors might cause you to suggest that the SPREAD above the base rate should be higher than the average spread for that category of loan?

1. Higher than average risk
2. High volatility in the base rate
3. Increase in the overnight funds rate
4. Lower than average expense to monitor the loan

Answer:

A) 1 only B) 1 and 2 C) 1, 2, and 4 D) 2 and 3