1- Bonds issued with a floating interest rate are advantageous to the bond issue

Question

1-

Bonds issued with a floating interest rate are advantageous to the bond issuer if interest rates ________ and advantageous to an investor when interest rates ________.

d. Decrease; decrease

2-

Financing in bonds denominated in more than one foreign currency can ________ the probability that the overall cost of foreign financing will be ________ than that of financing with the domestic currency.

a. Increase; decrease b. Increase; increase c. Decrease; increase

d. Decrease; decrease

2-

Financing in bonds denominated in more than one foreign currency can ________ the probability that the overall cost of foreign financing will be ________ than that of financing with the domestic currency.

a. Decrease; less b. Increase; less c. Decrease; more d. Increase; more e. [Decrease; more] and [Increase; less]

Explanation / Answer

(1) A falling interest rate is beneficial to the issuer as he/she needs to shell out less by means of interest coupon payments. Conversely, a rising interest rate will be beneficial to investors as they will earn higher yields.

Hence, the correct option is (c).

NOTE: Please raise a separate query for the solution to the remaining unrelated question.

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