Which of the Following Is Generally Considered an Advantage of Term

question 106

Multiple Choice

Which of the following is generally considered an advantage of term loans over publicly issued bonds?

• A) Higher flotation costs
• B) Speed, or how long it takes to bring the issue to the market
• C) Fixed bond terms after the bond has been issued
• D) Regular interest and principal payments on specified dates
• E) Standard terms of issue requiring no negotiation between the borrowing firm and the financial institution

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Definitions:

Risk-Free Rate

The theoretical return on an investment with zero risk, typically represented by the yield on government securities.

Expected Rate

The rate of return that an investor anticipates earning on an investment without taking into account inflation or other factors that could affect the actual yield.

Liquidity Spreads

The difference in yield or cost between liquid (easily convertible to cash) assets and illiquid assets, often indicative of the liquidity premium required by investors.

Security A

A generic term used to represent a particular stock or financial instrument in theoretical examples.