Which factor best explains the differences in loan interest rates set by a bank for different borrowers?

The correct answer is A) the degree of risk of default.

The factor that BEST explains the differences in loan interest rates set by a bank for different borrowers is the degree of risk of default.

In the banking system, borrowing money has a cost. The cost is the interest rates. That is why bankers do business. Interests are set by the degree of risk of borrowing and the time they give you to pay for the money borrowed. The Federal Reserve in the institution that can influence the interests rates stipulating reserve requirements to the banks.

"a government in which power is divided between state and national levels". federalism is a system of government in which entities such and state and province, share power with the national government.