Which of the Following Best Explains the Political Attractiveness of Debt

question 39

Multiple Choice

Which of the following best explains the political attractiveness of debt financing relative to taxation?

• A) Debt financing pushes the visible cost of government into the future.
• B) Debt financing exposes the current costs of government programs; taxes do not.
• C) Debt financing reduces the attractiveness of special-interest spending.
• D) Taxes allow politicians to supply voters with immediate benefits without having to impose a visible cost.

Differentiate between systematic and unsystematic risk, including their effects on portfolio diversification.

Explain the impact of market risk premium changes on the slope and position of the Security Market Line.

Understand the effects of portfolio adjustments on beta and portfolio expected return.

Describe the principles of market efficiency and their relevance to information announcements and stock prices.

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Definitions:

Activation Energy

The minimum amount of energy that must be provided to compounds to result in a chemical reaction.

Gaseous Products

The substances formed as a result of a chemical reaction that exist in the gas state at room temperature.

Thermal Energy

the internal energy present in a system due to its temperature.

Kinetic Energy

The energy possessed by an object due to its motion, proportional to its mass and the square of its velocity.