Question

A decrease in the interest rate paid by a business borrower will increase the likelihood that the firm will be able to repay its interest and principal on its debt securities or pay dividends on its equity securities.

(A) True
(B) False

Answer 1

(A) True

Step-by-step explanation:

The decrease in interest rate on borrowings will increase the saving of the business as business pays less on the borrowings. Now Business will be able to pay repay the interest and principal on debt securities or pay dividends on its equity shares from the savings cause from decrease in interest rate of borrowed amount.

Answer 2

(a) True

Step-by-step explanation:

Knowledge of interest rates helps to manage corporate profits and security prices. Understanding of the relationship between security prices, interest rates and corporate profits is key for cooperate growth.