According to MM, If Individuals Cannot Obtain the Same Borrowing

question 57

Multiple Choice

According to MM, if individuals cannot obtain the same borrowing terms as firms, then:

• A) capital structure may be relevant.
• B) capital structure may be irrelevant.
• C) individuals should not invest in levered firms.
• D)firms should increase their payments to individuals.

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Definitions:

Domestic Price

The price of goods or services within a country’s borders, influenced by local demand, supply, taxes, and other factors.

Oil Barrels

A standard unit of measure for crude oil and petroleum products, equivalent to 42 US gallons.

Comparative Advantage

The ability of an individual, company, or country to produce a good or service at a lower opportunity cost than competitors, enabling trade benefits.

Free Trade

International commerce that operates naturally without the interference of tariffs, quotas, or restrictions.