How Does a Syndicate Affect the Interest Rate That an MNC

question 41

Multiple Choice

How does a syndicate affect the interest rate that an MNC can expect to pay for a loan?

• A)Since syndicates pool resources to make loans,each participant in the syndicate assumes less risk related to the loan,and lower risk usually results in a lower interest rate on the loan.
• B)Since syndicates are government-sponsored institutions,they can obtain funds at less cost than other institutions,so they can loan money to MNCs at a lower interest rate.
• C)Since there is a significant cost involved in forming a syndicate,the interest rates charged by syndicates on the loans they make are higher to compensate for the increased costs.
• D)Since syndicates loan money to MNCs,the interest rates that they charge are the same interest rates that the MNC could obtain from any other source of funds.

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Definitions:

Herfindahl Index

A measure used to calculate the concentration of market power within an industry, indicating the competitiveness or monopolistic tendencies.

Herfindahl Index

A parameter for comparing the dimensions of enterprises within their industry, revealing the competition scope.

Concentration Ratio

A measure of the market share or dominance controlled by the largest firms within an industry, used to assess market competitiveness.