Instruction 8.1: For the Following Problem(s), Consider These Debt Strategies Being Considered

question 46

Multiple Choice

Instruction 8.1:
For the following problem(s) , consider these debt strategies being considered by a corporate borrower. Each is intended to provide $1,000,000 in financing for a three-year period.
∙ Strategy #1: Borrow $1,000,000 for three years at a fixed rate of interest of 7%.
∙ Strategy #2: Borrow $1,000,000 for three years at a floating rate of LIBOR + 2%,
to be reset annually. The current LIBOR rate is 3.50%
∙ Strategy #3: Borrow $1,000,000 for one year at a fixed rate, and then renew the
credit annually. The current one-year rate is 5%.
-Refer to Instruction 8.1.Which strategy (strategies) will eliminate credit risk?

• A)Strategy #1
• B)Strategy #2
• C)Strategy #3
• D)Strategy #1 and #2

---

Definitions:

Social Well-being

A dimension of well-being that involves having fulfilling relationships, social integration, support, and an understanding of community.

Prosocial Behavior

Behavior intended to benefit another without expectation of reward.

Perspective Taking

The ability to understand and consider a situation or the thoughts and feelings of others from their viewpoint, distinct from one's own.

Preschoolers

Young children who are in the age range of about 3 to 5 years old, typically not yet attending kindergarten but may be involved in early childhood education programs.