The change in economic value of a fixed-rate liability for a decrease in interest rates is considered to be good news.

Question

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A fixed-rate liability means that the interest rate is locked in and cannot be changed. Therefore, a decrease in interest rates would not benefit the holder of the liability as they would be receiving less interest income. It may be good news for borrowers who have fixed-rate debt, as they would be paying less in interest expenses.

The Change in Economic Value of a Fixed-Rate Liability for a Decrease