Risk Aversion Implies That a Higher Interest Rate Is Required

question 27

True/False

Risk aversion implies that a higher interest rate is required in order to induce creditors to make loans to bad credit risks.

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Definitions:

Acquisition

Acquiring ownership of another firm through the purchase of its assets, shares, or both.

Fair Value

An approximate cost at which a transaction involving assets or liabilities might occur between informed and voluntary parties without any pressure.

Credit Balance

A situation in an account where the total credits exceed the total debits.

Consolidated Buildings

The combined value of all buildings and related facilities owned by a company as presented in its consolidated financial statements.