An Important Feature of the Financial Market Crisis Was

question 61

Multiple Choice

An important feature of the financial market crisis was

• A) decreased interest rate spread on risky assets versus safe assets.
• B) increased investment by firms.
• C) an increase in the safe credit market interest rate, r.
• D) increased financial market uncertainty.
• E) a lower opportunity cost of investment.

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Definitions:

Incremental Value

The additional or extra value created by a new investment, project, or decision compared to its cost, often used in capital budgeting analyses.

Equity-Financed

Refers to funding a company or purchase by issuing shares of stock rather than borrowing money.

Price/Earnings Ratio

A ratio for valuing a company that measures its current share price relative to its per-share earnings.

Equity-Financed

Refers to the method of funding a company's operations, expansion, or projects using the capital raised through the sale of equity, rather than using debt.