Adjustable-Rate Bonds Are Identified by Which One of the Following

question 55

Multiple Choice

Adjustable-rate bonds are identified by which one of the following characteristics?

• A)The coupon rate will increase should the credit rating of the bond decline.
• B)Different bonds within the same issue have different coupon rates.
• C)Bondholders can defer coupon payments at their discretion.
• D)The amount of each coupon payment will depend on the free cash flow of the issuer.
• E)The coupon rate changes in response to changes in current market rates.

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Definitions:

BAT Model

BAT Model stands for the Behavioral Analysis and Therapy Model, which is typically related to psychology and behavioral sciences, not a common term in finance and hence might be mistaken or the context misidentified.

Cash Outflows

Money that exits a company, typically as a result of operational expenses, investment activities, and financing.

Opportunity Cost

Opportunity cost is the potential benefits an individual, investor, or business misses out on when choosing one alternative over another.

Target Cash Balance

A firm’s desired cash level as determined by the trade-off between carrying costs and shortage costs.