A negative effective financing rate for a U.S. firm indicates that the firm:
A) will incur a loss on the project financed with the funds.
B) paid more interest on the funds than what it would have paid if it had borrowed dollars.
C) will be unable to repay the loan.
D) None of these are correct.

Question

Quizplus · Accepted Answer

A negative effective financing rate does not necessarily mean a firm will incur a loss, pay more interest than if it had borrowed in dollars, or be unable to repay the loan. It could indicate that the firm has effectively paid less in interest than the nominal rate due to factors like favorable currency exchange movements or other financial benefits.

A Negative Effective Financing Rate for a U