What Is Meant by the Term 'Cost of Capital

question 19

Multiple Choice

What is meant by the term 'cost of capital'?

• A) The rate of return that a company has to offer finance providers to induce them to buy and hold a financial security
• B) The rate of return that a company has to offer shareholders as dividends
• C) The rate of return that a company has to offer purchasers of bonds to induce them to buy and hold a financial security
• D) The rate of return that a company has to pay for its capital investments

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Definitions:

Gold Futures Contracts

Agreements to buy or sell a specific amount of gold at a predetermined price on a set date in the future, used for hedging or speculation on gold prices.

Futures Price

The agreed upon price for the future delivery of assets such as commodities or financial instruments, set in a futures contract.

Contract Maturity

The designated date on which the principal amount of a financial instrument such as a bond, loan, or futures contract becomes due and payable.

August Futures Contract

A standardized contract to buy or sell a specific commodity or financial instrument at a predetermined price at a specified time in August.