When Markets Are More Liquid, Interest Rates Are _______ and the Level

question 109

Multiple Choice

When markets are more liquid, interest rates are _______ and the level of investment is _______.

• A) lower; higher
• B) lower; lower
• C) higher; higher
• D) higher; lower

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Definitions:

NPV

Net Present Value; a calculation that compares the present value of cash inflows with the present value of cash outflows over a period of time to assess profitability.

Cash Flow

The total amount of money being transferred into and out of a business, particularly affecting liquidity.

Cost Of Capital

The return rate that a company must earn on its investment projects to maintain its market value and attract funds.

NPV

Net Present Value; a method used in capital budgeting to evaluate the profitability of an investment or project by discounting future cash flows.