Which Three of the Following Are Advantages for the Firm

question 33

Multiple Choice

Which three of the following are advantages for the firm of floating- rate, as compared with fixed- rate, borrowings?

• A) At the time of arrangement fixed rates are usually above floating rates.
• B) If interest rates fall the cost of the loan falls.
• C) Returns on the firm's assets may go up at times of higher interest rates and fall at times of lower interest rates, therefore the risk of higher rates is offset.
• D) The firm may benefit from a rise in interest rates if, as with most businesses, its profits do not rise when interest rates rise.

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