In General, Long-Term Unsecured Debts Have Lower Interest Rates (Costs)

question 125

True/False

In general, long-term unsecured debts have lower interest rates (costs) than long-term secured debts for a particular firm. 

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Definitions:

Project Risk

The potential for encountering unknown or unforeseen factors that can lead to project failure, such as cost overruns, delays, and scope creep.

Cost of Equity

The return that shareholders require or expect to realize on their investment, representing the opportunity cost of investing in the company.

Yield

The earnings generated and realized on an investment over a particular period, expressed as a percentage of the investment's cost or current market value.

Risk Premium

The extra return or reward that an investor expects to receive for taking a higher risk compared to a risk-free asset.