If Economic Conditions Were Expected to Be Favorable, an Investor

question 21

True/False

If economic conditions were expected to be favorable, an investor would likely prefer a firm with a low degree of leverage.

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Definitions:

Commercial Paper

A short-term, unsecured debt instrument issued by corporations to fund immediate needs.

Simple Interest

Interest assessed only on the starting principal, or on the remaining portion of the principal that is due.

Annual Rate

The interest rate for a period of one year, not accounting for compounding within that year.

Promissory Note

A financial paper embodying a vow by one individual or entity to transfer a stated sum of money to another, either on demand or on a specified forthcoming date.