With the Background Ideas of Using the Cheapest Source First

question 103

Multiple Choice

With the background ideas of using the cheapest source first and the impact of asymmetric information,the Pecking Order Hypothesis predicts which of the following?

• A)Firms prefer internal financing second to external financing.
• B)If external financing is required,firms should first seek equity financing.
• C)If external financing is required,firms will choose to issue the riskiest security first,starting with debt financing and using equity as a last resort.
• D)If external financing is required,firms will choose to issue the safest or cheapest security first,starting with debt financing and using equity as a last resort.

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Definitions:

Campaign Finance

Refers to the funding of political campaigns, including the regulation and disclosure of where the money comes from and how it is spent.

Independent Expenditures

Expenses made by individuals or groups to support or oppose a political candidate or issue, without coordination with any candidate’s campaign.

Presidential Election

A process in which citizens of a country vote to elect the president, the head of the executive branch of the government.

Free-Rider Problem

A situation in which individuals benefit from resources or services without paying for them, which can lead to under-provision or depletion of those resources.