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Emil borrowed money so he would be able to afford to add a screened-in porch to the back of his house. When he applied for the loan, the rate on the loan was very low based given the current market trends. Over the following months, however, the market fluctuated a great deal, and suddenly he was faced with higher rates for the same loan. Which type of financial risk did emil face?.

Respuesta :

Emil applied for the loan, and due to the market fluctuation, suddenly he faced higher interest rates for the same loan. Emil faced interest rate risk.

Interest rate risk refers to a decrease in the value of an asset due to fluctuations in interest rate. Any change in the overall interest rate will reflect on the value of the asset or bond or any other fixed-rate investment. A rise in interest rate will decrease the price of the asset and vice versa.

In the case of Emil, his loans did not have a fixed rate which resulted in expensive borrowing for him. To prevent interest rate risk, it is beneficial to take loans with fixed-rate interest so that the rate does not fluctuate with the changes in the market and economy.

Learn more about interest rate risk here https://brainly.com/question/13163076

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