If a Firm Takes on ________ It May Be Downgraded

question 5

Multiple Choice

If a firm takes on ________ it may be downgraded by rating agencies,resulting in ________ interest payments.

• A)too much incremental debt; lower
• B)too much incremental debt; higher
• C)too little incremental debt; lower
• D)too little incremental debt; higher

---

Definitions:

Market Price

The current price at which an asset or service can be bought or sold in a marketplace, determined by supply and demand dynamics.

Strike Price

In options trading, the predetermined price at which the holder of the option can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.

Put Option

This is a financial deal which provides the participant the freedom, but not the compulsion, to part with a given amount of a principal asset at an established cost during a set span.

Market Price

The existing rate at which a service or asset is available for buying or selling in a market environment.