When Inflation Is Low and Stable, Firms

question 92

Multiple Choice

When inflation is low and stable, firms:

• A) can easily make judgments about relative real rates of return on alternative investments.
• B) can easily make judgments about relative nominal rates of return on alternative
• Investments.
• C) tend to invest more in real estate.
• D) tend to invest more in tax effective investments

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Definitions:

Bought Deal

A financing arrangement where an investment bank buys an entire new issue of securities from a company and resells it to investors.

Underwriter

A person or organization that evaluates and assumes the risk of another entity, often involved in issuing new securities as part of public offerings.

Securities

Financial instruments that represent an ownership position in a publicly-traded corporation (stock), a creditor relationship with a governmental body or a corporation (bond), or rights to ownership such as options.

Floatation Costs

The expenses incurred by a company when issuing new securities, including underwriting fees, legal fees, and registration fees.