Question

why might a bank offer to make a loan to a consumer at a low initial rate which will increase after a set period of time?a. too fool the customer into making an unmanageable commitmentb. too make the loan look more attractive and competitive in the long runc. too make the loan look more attractive and competitive nowd. the bank accepts making less money in the later years of the loan

Answer 1

I believe the answer is: c. to make the loan look more attractive and competitive now

By offering it at low initial rate, the people who borrow money would experience low burden if they plan to return the money within short period of time. This would make them much more likely to obtain a loan, and it also would make the bank that create the loan program looks better compared to their competitors.