Let D = Demand, S = Supply, P = Equilibrium

question 146

Multiple Choice

Let D = demand, S = supply, P = equilibrium price, Q = equilibrium quantity.What happens in the market for walnuts if the Centres for Disease Control and Prevention announces that consuming a half cup of walnuts each week helps to lower bad levels of cholesterol?

• A)D increases, S no change, P and Q increase
• B)S increases, D no change, P decreases, Q increases
• C)D and S increase, P and Q decrease
• D)D no change, S increases, P decreases, Q decreases

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Definitions:

Cost of Debt

The cost of debt is the effective rate that a company pays on its total debt, used in capital structuring decisions to evaluate the affordability of borrowing.

Dividend Growth Model

A model that estimates the value of a stock based on its expected dividends and their growth rate.

Retained Earnings

The portion of net earnings not paid out as dividends but reinvested in the business or kept as reserve.

Cost of Equity

The return a company theoretically pays to its equity investors, i.e., shareholders, to compensate them for the risk of investing in the stock.