What Happens When Interest Rates Rise

question 93

Multiple Choice

What happens when interest rates rise?

• A) Discretionary income increases.
• B) The demand for discretionary goods increases.
• C) Discretionary income is unchanged.
• D) The demand for discretionary goods decreases.
• E) Discretionary income increases and the demand for discretionary goods decreases.

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Definitions:

Capital Structure

The capital structure is the mix of a company's long-term debt, specific short-term debt, common equity, and preferred equity, which is used to finance its overall operations and growth.

Book Values

The net value of a company's assets, as recorded in its financial statements, minus its liabilities and intangible assets.

Market Value

The estimated amount for which an asset or company could be sold on the open market.

Retention Ratio

The portion of a company's earnings that is not distributed as dividends but is retained by the business for reinvestment.