A Corporation Is More Prone to Issue Floating-Rate Bonds When

question 208

Multiple Choice

A corporation is more prone to issue floating-rate bonds when they expect future interest rates to _____ over the life of the bond.

• A) Remain constant.
• B) Increase briefly and then decline slightly.
• C) Continually decline.
• D) Decline briefly and then increase significantly.
• E) Continually increase.

---

Definitions:

Tax Rate

The percentage at which an individual or corporation is taxed, either on income, property, or sales.

Deferred Taxes

Taxes applicable to income that is earned in one period but not payable until a future period due to differences between accounting and tax reporting.

FASB

The Financial Accounting Standards Board, the organization responsible for establishing and improving financial accounting standards in the United States.

Present Value Approach

A method to determine the current worth of a future sum of money or stream of cash flows given a specified rate of return.