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

question 4

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) Strategies #1 and #2

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Definitions:

Risk Factors

Elements or conditions that increase the likelihood of an undesirable outcome.

U.S. Teens

Individuals aged between 13 and 19 residing in the United States, encompassing a diverse group going through adolescence.

Sexually Transmitted

Referring to infections that are passed from one person to another through sexual contact.

Preventing Strategies

Approaches or methods implemented to avoid the occurrence of unwanted outcomes or diseases.