Which of the Following Statements Best Describes the Optimal Capital

question 51

Multiple Choice

Which of the following statements best describes the optimal capital structure? The optimal capital structure is the mix of debt, equity, and preferred stock that maximizes the company's ____.

• A) stock price.
• B) cost of equity.
• C) cost of debt.
• D) cost of preferred stock.
• E) earnings per share (eps).

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Definitions:

Price Level

An index that measures the average of current prices across the entire spectrum of goods and services produced in the economy.

Interest Rate

The amount charged by a lender to a borrower for the use of assets, expressed as a percentage of the principal, usually on an annual basis.

Money-Demand Curve

Illustrates the relationship between the quantity of money people want to hold and the interest rate, showing how changes in the interest rate affect the demand for money.

Federal Reserve

The central banking system of the United States, responsible for implementing the country's monetary policy and regulating its financial institutions.