Other Things Equal, the Combination of a ________ Saving Rate

question 29

Multiple Choice

Other things equal, the combination of a ________ saving rate and a ________ real interest rate will result in the largest accumulation of wealth over time.

• A)high; high
• B)high; low
• C)high; zero
• D)low; high

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Definitions:

Flotation Costs

Expenses incurred by a company in issuing new securities, including fees to underwriters, legal fees, and registration fees.

Dividend

A portion of a company's earnings distributed to shareholders, usually in the form of cash or additional stock.

Constant Growth

A model assuming that dividends or any other type of cash flow grow at a constant rate indefinitely.

Debt/Equity Ratio

A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity.