Polaris Inc

question 63

Multiple Choice

Polaris Inc. has a significant amount of bonds outstanding denominated in yen because of the attractive variable rate available to the firm in yen when the loan was made. However, Polaris does not have significant receivables in yen. Options available to Polaris to consider the risk of such a loan include which one of the following?

• A) doing nothing to offset the need for yen
• B) developing a currency swap of paying dollars and receiving yen
• C) developing an interest rate swap of receiving a variable rate while paying a fixed rate
• D) Polaris may engage in any of the strategies to a varying degree of effectiveness.

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Definitions:

Flip-Over Provision

A defensive mechanism in a company's charter intended to deter hostile takeovers by allowing shareholders to purchase additional shares at a discount in the event of a takeover.

Takeover

The acquisition of control of a company by another, through the purchase of a majority of its shares or through other strategies.