A Corporation Plans to Issue Long-Term Bonds Two Months from Now

question 41

Multiple Choice

A corporation plans to issue long-term bonds two months from now. To protect itself against a rise in interest rates, the corporation can buy put options. If interest rates rise, the interest cost of the bonds issued two months from now will be ________, but the put option will have ________ in value.

• A) higher; decreased
• B) lower; increased
• C) higher; increased
• D) lower; not changed

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Definitions:

Air Passages

The routes through which air travels in the body, including the nose, throat, and tubes leading to the lungs.

Alpha Rhythm

A pattern of brain wave activity characterized by 8 to 12 hertz frequencies, commonly observed in relaxed, wakeful states, especially in adults with closed eyes.

Theta Waves

Slow brain waves produced during the hypnagogic state.

Stage 1 Sleep

The initial phase of sleep, characterized by light sleep from which one can be easily awakened, and where the eyes move slowly and muscle activity slows.