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:

Intentional Behavior

Actions that are performed with awareness and purpose towards achieving a specific goal.

Illusory Correlation

The tendency to overestimate the link between variables that are related only slightly or not at all.

Hot Hand Player

The belief or phenomenon where a person is perceived to be more likely to succeed in a task (e.g., scoring in sports) because of previous consecutive successes, despite statistical evidence often suggesting randomness.

Coin Flip

A method of making a binary decision or selecting randomly between two options using the outcome of a tossed coin.