A Corporation with Funded Fixed-Rate Debt Might Prefer Floating-Rate Debt

question 16

Multiple Choice

A corporation with funded fixed-rate debt might prefer floating-rate debt if it thought that:

• A) interest rates would be declining.
• B) interest rates would be increasing.
• C) its bond rating might be lowered.
• D)its bonds were going to be converted into equity.

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Definitions:

Perceptual Distortion

A psychological phenomenon involving an alteration of perception, where the sensed reality of an environment is different from its objective reality.

Judgment

The ability to make considered decisions or come to sensible conclusions.

Obedience

The act of following orders or directives from authority figures, often studied in psychology in terms of social influence and authority.

Direct Order

denotes an explicit command given by a superior or authority figure, requiring immediate compliance without question.