The Risk of the Debt Capital Is Less Than That

question 32

Multiple Choice

The risk of the debt capital is less than that of other long-term contributors of capital because ________.

• A) they have a lower priority of claim against any earnings or assets available for payment
• B) they have the stockholders' personal assurance for all future interest payments
• C) there is no interest rate risk as the interest rate is predetermined
• D) the tax-deductibility of interest payments lowers the debt cost to a firm substantially

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Definitions:

Instrinsically Rewarding

An activity or object that is pursued for its own sake, providing innate satisfaction without the need for external reward.

Flow

The state of being in which a person becomes fully involved and engaged in the present time by some interesting, challenging, and intrinsically rewarding activity.

Educational Goals

Objectives or targets in an educational setting that students or educators aim to achieve, such as acquiring specific knowledge or skills.

Final Paper

An extensive written assignment, often serving as a significant part of the evaluation in an academic course.