Browning Enterprises Currently Has All Fixed-Rate Debt

question 22

Multiple Choice

Browning Enterprises currently has all fixed-rate debt. The firm would like to convert part of this to floating-rate debt. Which one of the following will accomplish this for the firm?

• A) Option on floating-rate bonds
• B) Forward contract on U.S. Treasury bills
• C) Interest rate swap
• D) Currency swap
• E) Interest rate call option

---

Definitions:

Minimum Efficient Scale

The smallest amount of production a company can achieve while still taking full advantage of economies of scale in terms of lowering the average cost per unit.

Long-run Average Total Cost

The average cost per unit of output over the long term, where all inputs are considered variable.

Output Q₀

The quantity of goods or services produced in a given period of time, denoted as Q₀ to specify a particular amount.

Diseconomies of Scale

The phenomenon where, as a firm expands, its costs start increasing per unit of output, usually due to inefficiencies and management challenges that arise with size.