____ 42. Firms should stop borrowing funds a. as soon as the bank raises the int
ID: 1199267 • Letter: #
Question
____ 42. Firms should stop borrowing funds
a.
as soon as the bank raises the interest rate.
b.
when the MRP of borrowed funds is equal to the cost of borrowing.
c.
whenever the future of the firm looks gloomy.
d.
if their debts are more than 25 percent of the value of the firm.
a.
as soon as the bank raises the interest rate.
b.
when the MRP of borrowed funds is equal to the cost of borrowing.
c.
whenever the future of the firm looks gloomy.
d.
if their debts are more than 25 percent of the value of the firm.
Explanation / Answer
Answer-B- When the MRP of borrowed funds is equal to the cost of borrowing.
We know that the firms are stop the borrowing when the MRP of borrowed funds is equal to the cost of borrowing. The cost of borrowing is the yield to the maturity. So the firm will close the borrowing at this stage.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.