When a country's risk-free rate falls, the cost of equity to an MNC in that country...

When a country's risk-free rate falls, the cost of equity to an MNC in that country ___, and the cost of debt to an MNC in that country __, other things held constant.

increases; increases

decreases; decreases

is not affected; increases

is not affected; is not affected

Solutions

Expert Solution

The correct answer is Decreases, Decreases

When the risk free rate falls, the overall required return of the investor fall down, Therefore, the cost of equity would decline and the cost of debt would also decline as the interest rates will fall down.

jeff jeffy answered 2 years ago

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