If the Equilibrium Interest Rate in the Market Is Estimated

question 45

Multiple Choice

If the equilibrium interest rate in the market is estimated to be 6%,which of the following is likely to occur if rates increase to 7%?

• A) The supply of funds shifts to the right.
• B) The total supply of lending shifts to the right.
• C) The quantity of funds supplied is greater than the quantity of funds demanded.
• D) The quantity of funds demanded is greater than the quantity of funds supplied.

Calculate free cash flow to the firm and to the equity holders.

Determine the impact of company financial policies (e.g., plowback ratio, EBIT, etc.) on firm value and investor returns.

Apply the dividend discount model and other valuation models to estimate the value of a stock.

Assess the impact of earnings growth, reinvestment rates, and required returns on stock price and valuation.

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