What Is a Decrease in Interest Rates Likely to Result

question 173

Multiple Choice

What is a decrease in interest rates likely to result in?

• A)no change in either consumption or investment spending
• B)a decrease in investment spending
• C)an increase in consumption spending
• D)a decrease in consumption spending

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Definitions:

Coupon Rate

The annual interest rate paid on a bond, expressed as a percentage of the bond's face value, generating regular income for investors.

WACC

Stands for Weighted Average Cost of Capital, a measure of a firm's cost of capital in which each category of capital is proportionately weighted.

Corporate Taxes

Taxes imposed on the income or profit of corporations by the government.

Unlevered Cost of Capital

The cost of capital for a company not taking into account its debt, essentially the return required on equity investment.