Which of the Following Would Explain Why a Firm Would

question 99

Multiple Choice

Which of the following would explain why a firm would want to sell bonds instead of stocks?

• A) The owners do not want the burden of bills to be paid.
• B) The owners are trying to finance production.
• C) The owners want to retain control of the business.
• D) There are more fees associated with issuing stocks.
• E) Bonds are easier to issue than stocks are.

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Definitions:

Interest Rate

The cost of borrowing money, expressed as a percentage of the total amount loaned.

Net Wealth

The total value of all financial and non-financial assets owned by an individual or entity minus any liabilities.

Future Prices

The expected price of a commodity, security, or currency set in a futures contract for delivery and payment at a specified future date.

Consumption Function

An economic formula representing the relationship between total consumption and gross national income, suggesting that people will spend more as their income increases.