Assume That the Risk-Free Interest Rate in the U

question 56

Multiple Choice

Assume that the risk-free interest rate in the U.S. is the same as that in Country M. Assume that the government of Country M is more likely to rescue local firms that experience financial problems. Other things being equal, Country M's firms are likely to use a ____ degree of financial leverage than U.S. firms. If a firm based in Country M had the same degree of financial leverage and the same operating characteristics as a U.S. firm, its cost of capital would be ____ than that of the U.S. firm.

• A) higher; higher
• B) higher; lower
• C) lower; lower
• D) lower; higher

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Definitions:

Versatility

The ability of a person or system to adapt or be adapted to many different functions or activities.

Interpersonal Relations

The way in which individuals interact, communicate, and build relationships with each other.

Communication Bias

Prejudices or predispositions that affect how we communicate and interpret messages from others.

Effective Leaders

Individuals who possess the ability to inspire and guide others towards achieving shared goals while exhibiting integrity, vision, and communication skills.