Under What Conditions Is It Most Likely That a Corporation

question 142

Multiple Choice

Under what conditions is it most likely that a corporation will issue new stock as a form of finance?

• A)when the interest rate is rising 
• B)when the interest rate is falling 
• C)when the firm's stock prices is falling 
• D)when bond prices are very high

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Definitions:

Commercial Paper Instruments

Short-term unsecured promissory notes issued by companies to finance their immediate cash needs.

Prime Rate

The interest rate banks charge their largest and best commercial customers.

Compensating Balances

Minimum balance requirements imposed by banks on corporate customers in exchange for banking services or loans.

Trust Receipts

Documents acknowledging the receipt of goods by a trustee while detailing the terms of an agreement for selling or holding the goods.