Good Company Prefers Variable to Fixed Rate Debt

question 2

Multiple Choice

Good Company prefers variable to fixed rate debt.Bad Company prefers fixed to variable rate debt.Assume the following information for Good and Bad Companies:

Given this information:

• A) an interest rate swap will probably not be advantageous to Good Company because it can issue both fixed and variable debt at more attractive rates than Bad Company.
• B) an interest rate swap attractive to both parties could result if Good Company agreed to provide Bad Company with variable rate payments at LIBOR + 1% in exchange for fixed rate payments of 10.5%.
• C) an interest rate swap attractive to both parties could result if Bad Company agreed to provide Good Company with variable rate payments at LIBOR + 1% in exchange for fixed rate payments of 10.5%.
• D) none of the above

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Definitions:

Marketing Plan

A comprehensive document that outlines a company's overall marketing effort, including strategies, objectives, and actions to achieve marketing goals.

Valid Assumptions

Assumptions that are logically justified and supported by evidence or sound reasoning.

Historical Data

Information from the past used for research, analysis, and planning by providing context or comparison for current conditions or forecasts.

Alternative Contingencies

Different or backup plans developed to address potential future events or circumstances that may impact objectives.