Floating-Rate Bonds Have Adjustable Rates to Protect Real Rates of Return

question 45

Multiple Choice

Floating-rate bonds have adjustable rates to protect real rates of return against inflation. The rates paid are limited by

• A)the put provisions of the issues.
• B)a floor rate that sets the minimum.
• C)a cap rate that sets the maximum.
• D)a floor rate that sets the minimum and a cap rate that sets the maximum.

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Definitions:

Sunk Costs

Expenses that have already been incurred and cannot be recovered, which should not affect future decision-making but often do.

Faulty Hindsight

The misjudgment of the reasons behind past decisions based on the outcome rather than on the information available at the time.

Sunk Costs

Costs that have already been incurred and cannot be recovered, which should not influence future business or personal decisions.

Escalated Commitment

A pattern of behavior in which an individual or group continues to rationalize their decisions, invest additional resources, and follow a failing course of action.