Instruction 8.1: For the Following Problem(s), Consider These Debt Strategies Being Considered

question 4

Multiple Choice

Instruction 8.1:
For the following problem(s) , consider these debt strategies being considered by a corporate borrower. Each is intended to provide $1,000,000 in financing for a three-year period.
• Strategy #1: Borrow $1,000,000 for three years at a fixed rate of interest of 7%.
• Strategy #2: Borrow $1,000,000 for three years at a floating rate of LIBOR + 2%, to be reset annually. The current LIBOR rate is 3.50%
• Strategy #3: Borrow $1,000,000 for one year at a fixed rate, and then renew the credit annually. The current one-year rate is 5%.
-Refer to Instruction 8.1. Which strategy (strategies) will eliminate credit risk?

• A) Strategy #1
• B) Strategy #2
• C) Strategy #3
• D) Strategies #1 and #2

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Definitions:

Values Incongruence

Values incongruence refers to the discrepancy or conflict between personal values and those of an organization or group, which can lead to dissatisfaction or ethical dilemmas.

Integration Strategy

Strategies aimed at combining processes, operations, or cultures from different units, organizations, or groups to achieve greater efficiency or harmony.

Cultural Intrusions

The imposition or infiltration of one culture's practices, values, or beliefs into another culture, often without consent.

Assimilation

The process by which individuals or groups adopt the culture or norms of another societal group, often losing some of their original cultural identity.