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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?
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A psychological reaction characterized by a refusal to accept or consider criticism or uncomfortable truths about oneself, often as a mechanism to protect self-esteem.
Endogamy
The practice of marrying within a specific social group, caste, or ethnic group, rejecting those from others as inappropriate for marriage or other close relationships.
Legal Barriers
Laws or regulations that constitute obstacles to certain actions or changes.
Family Size
The total number of members in a family unit, including parents and children.
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