If market interest rates have increased since a company last borrowed long-term funds, the market value of these long-term funds will likely be:

Question

Quizplus · Accepted Answer

When market interest rates increase, the value of long-term funds borrowed at a lower rate decreases. This results in the market value of the debt being lower than its book value. Therefore, choice B is the best option.

If Market Interest Rates Have Increased Since a Company Last