A firm with questionable credit should expect to pay the prime interest rate minus 2 percent.

Question

Quizplus · Accepted Answer

A firm with questionable credit is likely to have a higher risk of default, and therefore will be charged a higher interest rate to compensate for this risk. The prime rate, which is typically the rate charged to low-risk borrowers, will not be offered to a firm with questionable credit. Instead, they may be offered a higher rate, which could be prime plus a certain percentage, or some other rate determined by the lender. Therefore, it is false to say that a firm with questionable credit should expect to pay the prime interest rate minus two percent.

A Firm with Questionable Credit Should Expect to Pay the Prime