Debt Financing Is Made Up of Explicit and Implicit Costs

question 76

Multiple Choice

Debt financing is made up of explicit and implicit costs that refer to:

• A) a higher required ROE and the interest rate bondholders demand, respectively.
• B) the interest rate bondholders demand and a higher required ROE, respectively.
• C) the costs of equity and debt, respectively.
• D) the costs of issuing bonds and the interest rate bondholders demand, respectively.

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Definitions:

Mental Retardation

An outdated term for intellectual disability, characterized by below-average intellectual ability and a lack of skills necessary for day-to-day living.

Obsessive-Compulsive Disorder

A chronic anxiety disorder characterized by uncontrollable, recurring thoughts (obsessions) and behaviors (compulsions) that the individual feels the urge to repeat continuously.

Glycogen

A multibranched polysaccharide of glucose that serves as a form of energy storage in humans, animals, fungi, and bacteria.

Reductionism

The approach of analyzing complex phenomena by breaking them down into their simpler components.