If a Firm Has a Credit Risk Premium of 3

question 1

Multiple Choice

If a firm has a credit risk premium of 3 percent and the Treasury security rate is 4 percent, the firm will be able to borrow at ________. If the Fed implements a monetary policy that raises the Treasury security rate to 6 percent, the cost of borrowing for the firm will be ________.

• A)7 percent; 10 percent
• B)4 percent;  6 percent
• C)7 percent; 9 percent
• D)1 percent; 3 percent

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Definitions:

Procedural

Relating to the process by which something is done, encompassing the steps or methods involved.

Procedural Knowledge

The type of knowledge that involves knowing how to do something, often demonstrated through actions rather than words.

Assessed

Evaluated or estimated the nature, ability, or quality of something or someone.

Changed

To make or become different; to alter the form, nature, or appearance of something.