One of the primary factors that influences the interest rate a firm pays on long-term loans is the:
A)Intensity of competition the firm faces with new products.
B)Current level of government regulations.
C)General level of market interest rates.
D)Exchange rate of the euro to the U.S.dollar.

Question

Quizplus · Accepted Answer

The general level of market interest rates is one of the primary factors that influence the interest rate a firm pays on long-term loans. This is because the interest rate a lender charges reflects the opportunity cost of lending money, and the general level of market interest rates reflects the overall level of demand for credit and the supply of funds available for lending in the economy. Factors such as economic growth, inflation, and monetary policy decisions by central banks can all impact market interest rates, which in turn can affect the interest rate a firm pays on its long-term loans. Factors such as competition, government regulations, and exchange rates may also play a role in some cases, but they are generally secondary to market interest rates as drivers of long-term loan rates.

One of the Primary Factors That Influences the Interest Rate