Use the Table for the Question(s)below

question 40

Multiple Choice

Use the table for the question(s) below.
Suppose the term structure of interest rates is shown below:

-What is the shape of the yield curve and what expectations are investors likely to have about future interest rates?

• A)inverted; higher
• B)normal; higher
• C)inverted; lower
• D)normal; lower
• E)flat; unchanged

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Definitions:

Planning Horizon

The long-range time period the financial planning process focuses on, usually the next two to five years.

Dividend Policy

A company's strategy or policy to decide how much profit it will pay out to shareholders as dividends.

Retention Ratio

The fraction of net profits not paid out as dividends but kept within the corporation for reinvestment or other purposes.

Dividend Payout Ratio

The fraction of net income a firm pays to its shareholders in dividends, representing how much money a company returns to shareholders versus retaining for growth.