I’m not able to get this straight into my head… When market interest rates increase, will a company that issued fixed-rate debt prior to the increase in rates most likely experience a(n): … economic loss… change in the amount of debt recorded on the balance sheet a) … no…no b)… no…yes c)… yes…no d)…yes …yes
market interest rates increase price of bond falls but earlier you had sold the bonds at a higher price. so you have an economic gain. but this gain is not recorded on the balance sheet. so answer is economic loss: no recorded on balance sheet: no
cpk, basically meaning that the company has minimized the interest to be paid out which is an explicit factor with regards to opportunity cost and thus an econ gain. thanks
so if rates had decrease, you will experience economic loss, because economic loss includes opportunity costs, and you have locked yourself into a higher rate. Is that correct?
that’s correct, LongOnCFA.
Answer is A, There was a economic gain instead and BV does not change