Using R to Represent an Average Interest Rate Is

question 19

Multiple Choice

Using R to represent an average interest rate is

• A) an acceptable practice in the short run, because all interest rates on many different types of securities tend to move up and down together.
• B) a questionable practice in the short run, because securities with different risks pay different returns.
• C) a questionable practice in the long run, because term structure variations between short- and longer-term rates can be important.
• D) an acceptable practice in the long run, because short- and long-term rates on most securities tend to move in tandem.
• E) a and c.

---

Definitions:

Sole Proprietorships

A form of business organization where a single individual owns, manages, and is responsible for all aspects of the business, including debts.

Net Income

The amount of profit earned in a period after all expenses, taxes, and costs have been subtracted from total revenue.

Fixed Ratio

A financial metric that reflects the consistency of a company's financial performance by comparing various fixed costs to its total expenses.

Interest On Capital

The return on investment that is required or anticipated for the money or capital invested in a business or project.