INSTRUCTIONS: Choose the Word or Phrase in [ ] Which

question 18

Multiple Choice

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.
-The first thing you need to determine in order to reach an investment goal is the [rate of return you can receive | the amount of money you need to set aside periodically].

• A)for the first item
• B)for the second item
• C)if neither item will correctly complete the statement.

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Definitions:

Bond Issue

The process by which a government or corporation raises funds by selling bonds to investors, which are then repaid with interest at a future date.

Coupon

The interest rate stated on a bond, representing the amount of interest paid to bondholders on an annual basis.

Interest Tax Shield

The reduction in income taxes that results from deducting interest payments on debt from taxable income.

Unlevered Cost of Capital

The cost of capital for a company that has no debt, representing only the cost of equity.