7
QuizMultiple Choice

N/A — Exam

Question 7 • Personal Finance

Why do higher interest rates often lead to lower stock prices?

Answer
A
Higher borrowing costs can reduce company profits
B
Inflation immediately drops
C
Investors prefer higher-risk assets
D
Companies receive more loans

Explanation

When interest rates rise, companies generally pay more to borrow money. Those higher financing costs can reduce profits, making their shares less attractive to investors and putting downward pressure on stock prices. So the correct choice is A, “Higher borrowing costs can reduce company profits.”

AI-written and checked against the verified answer.

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