Concept:Interest rates on loans include compensation for the lender’s risk of default.Explanation:Risk is the main factor that causes interest rates to differ from one loan to another.A borrower with a higher chance of failing to repay is charged a higher interest rate.Government policies and general economic conditions set the base rate, but the risk attached to each loan determines the actual change in rate.The prevailing exchange rate, marginal efficiency of capital, and tax rate do not directly determine the interest change on individual loans.Answer:C. the risk associated with the loan.