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

question 30

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. After the fact, under which set of circumstances would you prefer strategy #2? (Assume your firm is borrowing money.)

• A)Your credit rating stayed the same and interest rates went up.
• B)Your credit rating stayed the same and interest rates went down.
• C)Your credit rating improved and interest rates went down.
• D)Not enough information to make a judgment.

---

Definitions:

Difficult Situations

Scenarios that are challenging or problematic to navigate, often requiring careful thought, planning, and communication to resolve.

Tact And Empathy

The ability to handle delicate situations with sensitivity and understanding, recognizing and responding appropriately to others' feelings and perspectives.

Employees' Perceptions

The way employees view or understand their workplace, culture, management, and overall job environment.

Androgyny

The combination of masculine and feminine characteristics into an ambiguous form, often pertaining to one’s gender expression or identity.