Firm a Has Assets That Are Mainly in Financial Securities

question 30

Multiple Choice

Firm A has assets that are mainly in financial securities and whose liabilities carry variable interest rates; Firm B has the same assets as Firm A and the same amount of liabilities but its liabilities are all at fixed interest rates. If the central bank lowers interest rates, everything else constant:

• A) Firm B's net worth will increase more than Firm A's.
• B) Firm A's net worth will increase more than Firm B's.
• C) Neither firm's net worth will change.
• D) The net worth of both firms will increase and by the same amount.

---

Definitions:

Materialistic

Focusing on material objects and physical comfort as more important than spiritual or non-material values.

Captivity Narratives

Accounts written by colonists after their time in Indian captivity, often stressing the captive’s religious convictions.

Indian Society

is the societal structure and cultural patterns found within India, characterized by a rich diversity of religions, languages, customs, and traditions.

Economic Values

The principles or standards guiding the worth of activities, goods, services, and transactions in an economic system, often influencing production, distribution, and consumption decisions.