11-54 Which of the Following Observations Concerning Floating-Rate Loans Is

question 5

Multiple Choice

11-54 Which of the following observations concerning floating-rate loans is NOT true?

• A)They are less credit risky than fixed-rate loans.
• B)They better enable FIs to hedge the cost of rising interest rates on liabilities.
• C)They pass the risk of interest rate changes onto borrowers.
• D)In rising interest rate environments,borrowers may find themselves unable to pay the interest on their floating-rate loans.
• E)The loan rate can be periodically adjusted according to a formula.

---

Definitions:

Shares Outstanding

The total number of a company's shares of stock that are owned by shareholders, including those held by institutional investors and restricted shares owned by the company’s officers and insiders.

Stock Split

A corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares, though the total market value remains the same.

Market Price

The rate currently set for the trade of assets or services in the marketplace.

Retained Earnings

The portion of a company's profits that is kept or retained and not paid out as dividends to shareholders.