Firm a Has Assets That Are Mainly in Financial Securities

question 30

Multiple Choice

Firm A has assets that are mainly in financial securities and whose liabilities carry variable interest rates; Firm B has the same assets as Firm A and the same amount of liabilities but its liabilities are all at fixed interest rates. If the central bank lowers interest rates, everything else constant:

• A) Firm B's net worth will increase more than Firm A's.
• B) Firm A's net worth will increase more than Firm B's.
• C) Neither firm's net worth will change.
• D) The net worth of both firms will increase and by the same amount.

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Definitions:

Plant Root

The part of a plant that typically lies below the surface of the soil and functions in anchorage, water and nutrient absorption, and sometimes in storage.

Club Fungi

A group of fungi characterized by the production of spores on club-shaped structures called basidia.

Ascomycota

Ascomycota, also known as sac fungi, is a division of fungi that store their spores in a sac-like structure called an ascus.

Basidiomycota

A phylum of fungi characterized by producing spores on basidia, often found as mushrooms, toadstools, smuts, rusts, and puffballs.