Debt Capital

question 34

Multiple Choice

Debt capital:

• A)costs the least because it's the most risky to the firm (interest creates financial risk).
• B)costs the most because it's safer and therefore more desirable.
• C)is cheapest because it's safest from the investor's perspective and interest is tax deductible to the issuing company.
• D)costs more than preferred because preferred is the most stable security.

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Definitions:

Aggregate Demand

The all-encompassing demand for goods and services within an economic sphere, calculated at a specific price level during a certain period.

Interest Rate

The cost of borrowing money, typically expressed as a percentage of the amount borrowed.

Fiscal Policy

The employment of expenditure and tax policies by a government to affect economic conditions.

Government Spending

Expenditures made by the government sector on goods and services, including salaries of public servants, public investments, and social security benefits.