Credit Cards Issued in Conjunction with Particular Charities or Organizations

question 40

Multiple Choice

Credit cards issued in conjunction with particular charities or organizations, like the Sierra Club or the Humane Society, that send a portion of their annual fee or percentage of their purchases back to the sponsoring organization are known as

• A) premium cards.
• B) prestige cards.
• C) affinity cards.
• D) secured credit cards.
• E) traditional charge accounts.

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Definitions:

Cost of Equity

The return that investors require for their investment in shares, representing the compensation for taking on the risk of investing in equity.

M&M Proposition I

M&M Proposition I, under the Modigliani-Miller theorem, states that in an ideal market, the value of a firm is not affected by how it is financed, whether through debt or equity.

Homemade Leverage

A strategy whereby investors adjust the financial leverage of their investment by borrowing or lending money on their own, rather than relying on the leverage inherent in their investments.

Financial Leverage

The use of borrowed funds (debt) to amplify the potential return on investment.