A Corporation Plans to Issue Long-Term Bonds Two Months from Now

Multiple Choice

A corporation plans to issue long-term bonds two months from now. To protect itself against a rise in interest rates, the corporation can buy put options. If interest rates rise, the interest cost of the bonds issued two months from now will be ________, but the put option will have ________ in value.

A) higher; decreased
B) lower; increased
C) higher; increased
D) lower; not changed