Which of the following may be said to create a debt market environment,whereby one company may obtain a comparative interest rate advantage over another company in the fixed interest rate market,compared with the floating interest rate market?
A) The existence of market segmentation between the fixed and floating rate markets.
B) Typically, fixed-rate market risk premiums are based on external credit rating agency reports.
C) Professional institutional lenders, such as banks and merchant banks, apply their own internal credit risk premiums.
D) All of the given answers.

Question

Quizplus · Accepted Answer

The existence of market segmentation, reliance on external credit ratings for fixed-rate market risk premiums, and the application of internal credit risk premiums by professional lenders all contribute to creating a debt market environment where one company may obtain a comparative interest rate advantage over another. These factors influence the interest rates and terms under which companies can borrow, leading to potential advantages in either the fixed or floating interest rate markets depending on a company's specific situation and the prevailing market conditions.

Which of the Following May Be Said to Create a Debt