An Investor Might Prefer Floating-Rate Debt If She Thought That

question 79

Multiple Choice

An investor might prefer floating-rate debt if she thought that:

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

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Definitions:

Capital Balances

The amount of money that partners or shareholders have contributed to a business or the equity they have in a business.

Net Income

The total profit of a company after all expenses, including taxes and operational costs, have been deducted from total revenue.

Closing the Revenue

Closing the Revenue involves transferring the revenue earned during an accounting period to the capital account to prepare the company's books for the next period.

Original Investments

The capital that the owners or shareholders initially put into the business to fund operations.