If the Rate of Return Is Lower Than the Cost

question 89

Multiple Choice

If the rate of return is lower than the cost of borrowing:

• A)the investor will lose money on net after paying back the loan.
• B)the investor should take out the loan.
• C)the borrower will make money by taking out the loan.
• D)All of these are true.

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Definitions:

Cumulative Preferred Stock

A type of preferred stock that accumulates unpaid dividends, which must be paid out before any dividends can be issued on common stock.

Common Stock

Common stock refers to shares of ownership in a corporation, granting holders voting rights and a share in the company's profits through dividends.

Commission Charges

Fees paid to an agent or company for facilitating a sale, typically calculated as a percentage of the sale price.

Dollar Amount

The dollar amount refers to a monetary value expressed in units of currency, particularly in dollars.