The First Break in the MCC Usually Occurs Because

question 162

Multiple Choice

The first break in the MCC usually occurs because:

• A)debt costs more as more is raised because the firm appears riskier to investors.
• B)equity capital is more expensive when raised from outside sources.
• C)the firm runs out of money.
• D)it becomes impossible to sell more preferred stock.

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Definitions:

Payments

Transactions or transfers of money from one person or entity to another.

Duration

A metric indicating how the price of a bond or another type of debt instrument reacts to interest rate fluctuations, usually denoted in years.

Interest Rates

The cost of borrowing money or the return on investment for savings, typically expressed as a percentage.

Interest Sensitivity

The degree to which the price of a financial asset responds to changes in interest rates.