Which of the Following Statements with Respect to Floating-Rate Debt

question 13

Multiple Choice

Which of the following statements with respect to floating-rate debt is incorrect?

• A)If the market rate of interest increases,the market value of the floating-rate debt will remain the same.
• B)If the market rate of interest decreases,the cash interest payment required by the issuing company would decrease.
• C)If the market rate of interest increases,the investors benefit while the issuing corporation does not benefit.
• D)If the market rate of interest decreases,both the issuing company and the investors benefit.

---

Definitions:

Suretyship Contract

An agreement whereby a party (surety) guarantees the performance of an obligation by another party (principal) to a third party (obligee).

Primarily Liable

The main party responsible for fulfilling an obligation or settling a debt in legal or financial contexts.

Secondarily Liable

Refers to a party who is indirectly responsible for a debt or obligation, where primary liability lies with another party, but the secondary party may be called upon to fulfill the obligation if the primary fails to do so.

Collateral

Assets that are pledged as security for the repayment of a loan, which can be seized by the lender if the borrower fails to repay the loan as agreed.