Which of the following businesses are most exposed to interest rate risk? * A. A company with a high equity to debt ratio B. A company with a large amount of floating rate debt C. An al-equity company D. An investment company with an investment portfolio that matches its investment horizon.

Which of the following businesses are most exposed to interest rate risk? * A. A company with a high equity to debt ratio B. A company with a large amount of floating rate debt C. An al-equity company D. An investment company with an investment portfolio that matches its investment horizon.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

ChapterA2: Investments

Section: Chapter Questions

Problem 3MCQ

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Concept explainers

Functions of Financial Institutions

Financial institutions are businesses that are formed to deal with financial and monetary transactions. These organizations primarily accept deposits, advance loans, make investments, and provide foreign exchange services. Financial institutions include, but are not limited to, banks, insurance companies, trust companies, brokerage firms, and investment bankers. Because financial institutions play such an important role in the economy in terms of monetary transactions, regulating their activities has become a requirement for governmental authorities. As a result, the government creates a multitude of laws and regulations to oversee the activities of financial institutions.

Question

Which of the following businesses are most exposed to interest rate risk? *

A. A company with a high equity to debt ratio

B. A company with a large amount of floating rate debt

C. An al-equity company

D. An investment company with an investment portfolio that matches its investment horizon.

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