Assume There Are Just Two Assets,money and Bonds

question 56

Multiple Choice

Assume there are just two assets,money and bonds.We can expect that an individual with a given level of wealth will

• A)hold less money when bond prices rise.
• B)hold more money when the current interest rate is very low.
• C)not hold money as long as bonds pay a positive rate of interest.
• D)hold lots of money even at very high interest rates.
• E)hold less money when the current interest rate is very low.

---

Definitions:

Cash Dividends

Distributions of a corporation's earnings to shareholders in the form of cash.

Statement of Cash Flows

A financial report that shows how changes in balance sheet accounts and income affect cash and cash equivalents, breaking down the analysis to operating, investing, and financing activities.

Operating Activities

Activities directly related to the primary operations of a business, including production, sales, and distribution, which are reflected in its cash flow.

Indirect Method

A way of preparing the cash flow statement where net income is adjusted for changes in balance sheet items to arrive at cash flow from operating activities.