Floating-rate debt is advantageous to investors because the interest rate moves up if market rates rise. Since floating-rate debt shifts interest rate risk to companies, it offers no advantages to corporate issuers.

Question

Quizplus · Accepted Answer

This statement is false. Floating-rate debt can offer advantages to corporate issuers. It can provide them with more flexibility in managing their debt and can also potentially lower their borrowing costs compared to fixed-rate debt. Additionally, for companies operating in volatile industries or with uncertain cash flows, floating-rate debt can help mitigate interest rate risk.

Floating-Rate Debt Is Advantageous to Investors Because the Interest Rate