The Cost of Retained Earnings Is

question 82

Multiple Choice

The cost of retained earnings is:

• A) the cheapest component cost
• B) zero because the firm does not have to pay interest or dividend to itself
• C) always less than the cost of new common stock
• D) typically cheaper than the cost of preferred stock

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Definitions:

Natural Rate

Refers to the long-term unemployment rate or interest rate that is observed once the effect of short-term cyclical factors has been removed.

Aggregate Demand

The entirety of demand for goods and services in an economic setting, pegged at an established price level and during a defined time.

Unemployment Rate

The percentage of the workforce currently without jobs and actively searching for employment.

Natural Rate

Often refers to the natural rate of unemployment where the labor market is in equilibrium, or the natural rate of interest that equates savings and investment.