The Quantity of Money Demanded to Satisfy Transaction Needs

question 75

Multiple Choice

The quantity of money demanded to satisfy transaction needs:

• A) is intended for unexpected expenditures.
• B) increases with the level of real GDP.
• C) decreases with the level of real GDP.
• D) is unrelated to either national income or the interest rate.

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Definitions:

Firm Value

The total value of a company, measured by its market capitalization plus debts, minority interest, and preferred shares, minus total cash and cash equivalents.

Cost of Equity

The return a company theoretically pays to its equity investors to compensate them for the risk they undertake by investing in the stock.

WACC

Weighted Average Cost of Capital. It represents the average rate that a company is expected to pay to finance its assets, weighted according to the proportion of equity and debt in its capital structure.

Free Cash Flow

The amount of cash generated by a business that is available for distribution among all the securities holders of an organization, including dividends, share repurchases, and debt repayments.