In Which of the Following Situations Would You Prefer to Be

question 70

Multiple Choice

In which of the following situations would you prefer to be borrowing?

• A) The interest rate is 9 percent and the expected inflation rate is 7 percent.
• B) The interest rate is 4 percent and the expected inflation rate is 1 percent.
• C) The interest rate is 13 percent and the expected inflation rate is 15 percent.
• D) The interest rate is 25 percent and the expected inflation rate is 50 percent.

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Definitions:

Conglomerate Acquisition

A conglomerate acquisition occurs when a company buys another company in a completely unrelated business sector, aiming for diversification of business interests.

Poison Pill

A defensive strategy used by companies to prevent or discourage hostile takeovers by making the company less attractive to the acquirer.

Golden Parachute

Substantial benefits given to top executives if the company is taken over by another firm, serving as a deterrent for unwanted takeovers.

Unfriendly Takeover

An attempt by one company to acquire control of another company without the consent or cooperation of its management or board of directors.