Which of the statements below is TRUE?
A)The frequency of bankruptcy for a high-tech up-start firm is lower than for a blue-chip firm,so we see higher borrowing rates for start-ups than for mature firms.
B)The frequency of bankruptcy for a high-tech up-start firm is higher than for a blue-chip firm,so we see lower borrowing rates for start-ups than for mature firms.
C)The frequency of bankruptcy for a high-tech up-start firm is lower than for a blue-chip firm,so we see lower borrowing rates for start-ups than for mature firms.
D)The frequency of bankruptcy for a high-tech up-start firm is higher than for a blue-chip firm,so we see higher borrowing rates for start-ups than for mature firms.

Question

Quizplus · Accepted Answer

The statement that is true is that the frequency of bankruptcy for a high-tech up-start firm is higher than for a blue-chip firm, so we see higher borrowing rates for start-ups than for mature firms. This is because start-up firms are considered to be riskier investments due to their uncertain future and higher probability of failure. Thus, lenders charge higher interest rates to compensate for the higher risk of default.

Which of the Statements Below Is TRUE