CIMA Exam CIMAPRO19-P03-1 Topic 1 Question 69 Discussion

Actual exam question for CIMA's CIMAPRO19-P03-1 exam

Question #: 69
Topic #: 1

[All CIMAPRO19-P03-1 Questions]

TYU is a retailer selling televisions. The company is financed wholly by equity.

Why might TYU be exposed to interest rate risk?

ACustomers' disposable income may change.

BTYU's competitors may have variable rate borrowings.

CTYU's suppliers may have borrowings.

DTYU's cost of capital will vary with interest rates.

ETYU's competitors may have fixed rate borrowings.

Show Suggested Answer

Suggested Answer: C, D

by Jacquelyne at Jun 01, 2024, 12:54 PM

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Cassie

7 days ago

I think the correct answer is D. TYU's cost of capital will vary with interest rates, so it's exposed to interest rate risk even though it's financed entirely by equity.

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Demetra

13 days ago

But what about E) TYU's competitors may have fixed rate borrowings? Wouldn't that also affect TYU's competitiveness?

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Alayna

14 days ago

I agree with Janae. If TYU's cost of capital is affected by interest rates, it could impact their financial stability.

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Janae

16 days ago

I think TYU might be exposed to interest rate risk because of D) TYU's cost of capital will vary with interest rates.

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