A fiRm's Cost of Debt

question 176

Multiple Choice

A firm's cost of debt:

• A) Increases as the tax rate increases.
• B) Increases when the firm's bond rating increases.
• C) Is equal to the coupon rate on the firm's latest bond issue.
• D) Is the interest rate the firm must pay on new debt.
• E) Is inversely related to market rates.

---

Definitions:

Group Pressure

The influence exerted by a group on its members to align their attitudes, beliefs, or behaviors with the group norms.

Solomon Asch

He was a psychologist best known for his research on conformity, showing how individuals often conform to the opinions of the majority even when they are contrary to their own beliefs.

Conformity

The act of matching attitudes, beliefs, and behaviors to what is perceived as social norms.

Normative Social Influence

The effect other individuals have on us, causing conformity so we gain their approval and acceptance.