Which of the following is the primary goal of debt management policy?

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BlackTom AI · Accepted Answer

The question asks for the primary goal of debt management policy. Since the provided answer indicates option c is 'minimizing the cost of borrowing,' we can reason through why this is typically regarded as the central objective in debt management.

In public finance and corporate finance, debt management policy aims to optimize the structure and timing of debt to ensure that funds are available to meet obligations while keeping financing costs as low as possible over time. Lower borrowing costs reduce interest expenses, free up resources for productive uses, and improve fiscal sustainability.

Even though the list of answer options is not shown here, discussing the core idea helps validate why minimizing the cost of borrowing is a logical primary goal. When governments or organizations borrow, they face trade-offs among cost, risk, and liquidity; however, the predominant emphasis is often on cost efficiency to maximize the affordability and reliability of debt service.

If other options had been provided, they might have referenced factors such as debt risk, repayment flexibility, or liquidity management. While these are important considerations, they typically serve to support or balance the primary aim of minimizing debt service costs rather than to override it. In practice, optimal debt management seeks a cost-effective debt portfolio that also satisfies risk and payoff timing constraints.

In summary, prioritizing the reduction of borrowing costs aligns with sustainable fiscal management and long-term financial viability, which is why option c would be viewed as the correct depiction of the primary goal in debt management policy.

NFLS2024ECON11 Textbook Homework 5. Monetary Policy and Phillips Curves - Modules 4.5-4.7, 5.1-5.2, 5.4-5.5, EMB

Which of the following is the primary goal of debt management policy?

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