A organisation intends to collect $1,000,000 to fund the construction of a new factory. Which of the comments below is the most accurate? a. Where a fixed rate loan rather than a variable rate bond is used to collect the million dollars, the risk of the loans would be smaller. b. If interest is required to collect the million dollars, the risk of the debt would be cheaper if it is issued as a mortgage rather than a term loan. c. Where the million dollars were collected by debt, however $500,000 is raised as a first mortgage bond on the new plant and $500,000 as debentures, the interest cost on the first mortgage bonds would be lower than if the whole $1 million were generated by the sale of first mortgage bonds. d. If the company's management believes that interest rates are almost likely to increase in the near future, it will be particularly eager to include a call clause included in the indenture. e. None of the above assertions are true.
45. A organisation intends to collect $1,000,000 to fund the construction of a new factory. Which of the comments below is the most accurate?
a. Where a fixed rate loan rather than a variable rate bond is used to collect the million dollars, the risk of the loans would be smaller.
b. If interest is required to collect the million dollars, the risk of the debt would be cheaper if it is issued as a mortgage rather than a term loan.
c. Where the million dollars were collected by debt, however $500,000 is raised as a first mortgage bond on the new plant and $500,000 as debentures, the interest cost on the first mortgage bonds would be lower than if the whole $1 million were generated by the sale of first mortgage bonds.
d. If the company's management believes that interest rates are almost likely to increase in the near future, it will be particularly eager to include a call clause included in the indenture.
e. None of the above assertions are true.
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