Question

If your short-term interest rate (the rate on your current debt) is 12.1%, then your bond rate (the rate on your long-term debt) is:

Answer 1

Answer: 13.5% (14% higher than the current debt rate)

Step-by-step explanation:

Since the short-term interest rate (the rate on your current debt) is 12.1%, then it should be noted that the rate on the long term debt will be higher than the rate on the short term debt.

The long term debt have a higher duration and therefore have a higher rate when compared to the short term debt. Therefore, the correct option will be 13.5% (14% higher than the current debt rate) since it's higher than the 12.1% given as the short term rate.