Which of the statements below is FALSE?
A)The "riskier" borrower will most likely have to pay a lower cost for funds.
B)In the bond market,we see different rates as the different yields on bonds for different companies.
C)In the equity market,we see different rates as the different required returns for companies due to their different betas.
D)In general,the cost of funds for an individual or company will be directly related to the lender's view of the risk of repayment of the funds.

Question

Quizplus · Accepted Answer

The statement "The 'riskier' borrower will most likely have to pay a lower cost for funds" is false. In general, lenders charge higher interest rates to borrowers they perceive as more risky, because they demand compensation for taking on additional risk. Therefore, the cost of funds for a riskier borrower will typically be higher, not lower.

Which of the Statements Below Is FALSE