Instruction 9.1: For the Following Problem(s), Consider These Debt Strategies Being Considered

question 43

Multiple Choice

Instruction 9.1:
For the following problem(s) , consider these debt strategies being considered by a corporate borrower. Each is intended to provide $1,000,000 in financing for a three-year period.
-Strategy #1: Borrow $1,000,000 for three years at a fixed rate of interest of 7%.
-Strategy #2: Borrow $1,000,000 for three years at a floating rate of LIBOR + 2%, to be reset annually. The current LIBOR rate is 3.50%
-Strategy #3: Borrow $1,000,000 for one year at a fixed rate, and then renew the credit annually. The current one-year rate is 5%.
-Refer to Instruction 9.1. Which strategy (strategies) will eliminate credit risk?

• A)Strategy #1
• B)Strategy #2
• C)Strategy #3
• D)Strategy #1 and #2

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Definitions:

Trait

A characteristic or quality of an individual, often inherent, that influences their behavior and actions.

Leader-Member Exchange

A theory in organizational psychology that focuses on the two-way (dyadic) relationship between leaders and followers, emphasizing that the quality of these relationships can affect outcomes like job satisfaction and performance.

Skills

Specific abilities and competencies that enable an individual to perform tasks effectively in a professional or personal context.

Behavioral Approach

A methodology in psychology and organizational studies focusing on observable behaviors and the ways in which learning influences behavior.