Regional or international division of labour: Different countries or regions specialise in the production of different products according to the resources that they haveType of Loan Floating Rate Loan Fixed Rate Loan Potential Advantages © Applicable interest rate tends to be the lowest available at the time the loan is initiated, * If interest rates trend lower, interest expense can be reduced. + Rsk of changes in interest rate market are removed «Takes advantage ofa favorable rate environment to lock- in long-term interest stability on a loan Potential Disadvantages © When interest rates trend higher, loans become more expensive. © Borrower carries the interest rate risk. © More expensive form of a loan at the time it is initiated compared toa floating-rate loan. + Pre-payment penalty may be required if loan is paid off ealy