For a firm, a decrease in the interest rate resulting from monetary policy can:

Question

Quizplus · Accepted Answer

A decrease in interest rates resulting from monetary policy can reduce the cost of a firm's liabilities, such as loans and bonds, making it cheaper for the firm to borrow money. This can lead to increased profitability as the firm can borrow more to invest in its business or pay dividends to shareholders. However, it may also result in lower returns on interest-earning assets held by the firm, such as bonds, but this is typically offset by the lower cost of borrowing. A decrease in interest rates does not necessarily decrease the value of a firm's assets or its net worth.

For a Firm, a Decrease in the Interest Rate Resulting