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Problem Eight: Effect of Interest Rate Changes on Leverage
Assume that company ABC issues $20 million in long-term debt at par when interest rates were low and company DEF issued $20 million in long-term debt at par when interest rates were high. Assuming that interest rates remain high:
a. Which company will have the higher debt/capital ratio (assume no other debt and identical equity)?
b. ABC's debt matures in 18 months and DEF's debt matures in 9 years. What would be the effect on your analysis?
Ethnocentrism
The belief in the inherent superiority of one's own ethnic group or culture, often accompanied by a disdain for other groups.
Exclusionary Policies
Rules or practices designed to intentionally or unintentionally exclude certain groups or individuals.
Stereotypes
Stereotypes are oversimplified and generalized beliefs about a particular group of people or things, which often do not consider individual differences.
Self-fulfilling Prophecies
Expectations about a situation or person that lead to actions which cause the expectations to come true.
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