The market value of floating-rate debt of $200,000 will
A)rise by $2,000 with a 1% rise in interest rates.
B)fall by $2,000 with a 1% fall in interest rates.
C)remain unchanged with a change in interest rates.
D)will rise in the short run and fall in the long run with a change in interest rates.

Question

Quizplus · Accepted Answer

The market value of floating-rate debt remains relatively stable or unchanged with changes in interest rates because the interest payments adjust to reflect current market rates, thus mitigating the impact of interest rate fluctuations on the debt's market value.

The Market Value of Floating-Rate Debt of $200,000 Will