When Firm Borrows at the ________ Cost of Capital for Debt,its

question 61

Multiple Choice

When firm borrows at the ________ cost of capital for debt,its equity cost of capital ________.

• A) low; rises
• B) high; rises
• C) low; decreases
• D) high; decreases

---

Definitions:

Natural Rate

Often refers to the natural rate of unemployment, which is the level of unemployment consistent with a stable rate of inflation, not zero unemployment.

Unemployment

The situation in which individuals who are capable of working and are actively seeking work remain un-hired.

Money Growth

The increase in the amount of money in an economy over time.

Unemployment Compensation

Financial payments provided to individuals who have lost their jobs until they find new employment.