Instruction 15.1: for Following Problem(s), Consider These Debt Strategies Being Considered by Considered

question 39

Multiple Choice

Instruction 15.1:
For 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 15.1. Which strategy (strategies) will eliminate credit risk?

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

---

Definitions:

Imagery

The use of vivid or descriptive language to represent objects, actions, or ideas in the mind's eye.

Thought Processes

The internal mental activities through which humans process information, including perception, memory, and problem-solving.

Female Psychologist

A psychologist who identifies as female, contributing to the field of psychology through research, clinical practice, or teaching.

Hay Fever Drug

Medications used to relieve the symptoms of hay fever, such as sneezing, runny nose, and itchy eyes, typically including antihistamines.