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

question 17

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. Choosing strategy #2 will:

• A) guarantee the lowest average annual rate over the next three years.
• B) eliminate credit risk but retain repricing risk.
• C) maintain the possibility of lower interest costs, but maximizes the combined credit and repricing risks.
• D) preclude the possibility of sharing in lower interest rates over the three-year period.

Assess the role of formal and informal structures in organisational design and management.

Evaluate the trends and shifts in organisational design choices, including centralisation, decentralisation, and the reduction of management levels.

Compare and contrast functional, divisional, and matrix structures, including their contexts of use.

Understand the organising function in management and its relationship with other management functions.

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Definitions:

Marginal Rates of Substitution

The speed at which a buyer is prepared to sacrifice one item for another while keeping their satisfaction constant.

Bads

Are items that people do not desire to have, opposite to goods, which have a negative impact on utility when consumed.

Indifference Curves

Graphical representations in microeconomics showing different bundles of goods between which a consumer is indifferent.

Indifference Curves

Indifference Curves represent combinations of two goods that provide the consumer with the same level of satisfaction or utility, illustrating trade-offs in consumption choices.