An Inverse Floater and a Super-Inverse Floater Are More Valuable

question 17

Multiple Choice

An inverse floater and a super-inverse floater are more valuable to a purchaser if:

• A)interest rates stay the same.
• B)interest rates fall.
• C)interest rates rise.
• D)if held for a long time.
• E)None of the above.

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Definitions:

Assumptions

Premises or conditions accepted as true or certain without proof for the purpose of further analysis or argument.

Basic Assumptions

Fundamental beliefs or principles that underlie the financial accounting system, including economic entity, monetary unit, time period, and going concern.

Internal Growth Rates

The maximum rate at which a company can expand using only internal financial resources without resorting to borrowing or seeking new equity investment.

External Financing Needs (EFN)

The amount of funding a business requires from external sources to finance its planned growth or expansion activities.