With Fixed Interest Rates,unanticipated Deflation Hurts ________ Because ________

question 84

Multiple Choice

With fixed interest rates,unanticipated deflation hurts ________ because ________.

• A)lenders; they get paid back in less valuable dollars
• B)lenders; they get paid back in more valuable dollars
• C)borrowers; they repay the loan in more valuable dollars
• D)borrowers; they repay the loan in less valuable dollars

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Definitions:

Cost of Equity

The return a firm theoretically pays to its equity investors to compensate them for the risk they undertake by investing their capital.

WACC

Weighted Average Cost of Capital; an estimation of a corporation's cost of capital, with each capital category being weighted in proportion.

Cost of Equity

The return that shareholders require on their investment in the company, often estimated using models such as the Capital Asset Pricing Model (CAPM).