Which of the Following Suggests That Higher Interest Rates Are

question 114

Multiple Choice

Which of the following suggests that higher interest rates are charged to high risk borrowers?

• A)Risk/return tradeoff
• B)Compensating balance concept
• C)Cost-benefit analysis
• D)Direct relationship principle

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Definitions:

Net New Equity

The difference between equity capital raised by issuing new shares and the equity capital reduced by buying back shares.

Dividends Paid

Payments made by a corporation to its shareholder members, distributing a portion of the company’s earnings.

Net New Borrowing

The total amount of new debt a company has taken on minus any debt that has been repaid during a specific period.

Interest Payments

Payments made to a lender by a borrower in return for the use of borrowed money, typically calculated as a percentage of the principal.