Statements

True

False

The higher the interest rate on a firm$$s debt, the lower will be the firm$$s profits, all other considerations remaining constant.

An increase in the interest rate paid by a business borrower will reduce the firm$$s default risk, all other considerations remaining constant.

In general, when interest rates increase, the prices and values of financial assets decrease.

A sharp increase in interest rates will decrease the price of bonds and increase the interest income available to new bondholders. This will increase the demand for bonds compared to the demand for stocks, all other considerations remaining constant.