Consider the Following Equation: = (1

question 112

Multiple Choice

Consider the following equation: = (1 + ) - 1 The term in this equation refers to:

• A)the cost of capital in terms of dollars.
• B)the risk-free rate of interest on the yen.
• C)the risk-free rate of interest on the dollar.
• D)the cost of capital for the firm in terms of yen.
• E)the yen/dollar exchange rate.

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Definitions:

Inferior Good

A type of good for which demand decreases as the income of consumers increases, opposite to what is observed with normal goods.

Diminishing Marginal Utility

The principle that as a person consumes more of a good, the satisfaction (utility) gained from consuming an additional unit decreases.

Total Satisfaction

The total amount of pleasure or utility that a consumer receives from consuming a certain quantity of goods or services.

Utility-Maximizing

The process of adjusting consumption of goods and services to achieve the highest possible level of satisfaction or utility.