Lowering the Discount Rate Would Have Which of the Following

question 76

Multiple Choice

Lowering the discount rate would have which of the following effects?

• A) It would decrease the overall rate of taxation.
• B) It would discourage banks from increasing their borrowing from the Federal Reserve.
• C) It would encourage banks to borrow more and to extend more loans at lower rates.
• D) It would increase the amount of federal bonds sold to foreign countries.

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Definitions:

Cost of Equity

The return that investors expect for investing in a company's equity, reflecting the compensation for the risk of investing.

Tax Rate

The percentage at which an individual or corporation is taxed by the government on their income or profit.

Dividend Growth Rate

The annual rate at which a company's dividend payouts increase, indicative of its financial health and profit distribution policy.

Annual Dividends

The sum of dividends paid by a company to its shareholders annually, often used to calculate the dividend yield.