Which of the Following Is a TRUE Statement Relative to Retained

question 327

Multiple Choice

Which of the following is a TRUE statement relative to retained earnings and investment?

• A) Lower interest rates stimulate borrowing for investment, but have no effect on the use of retained earnings for investment spending.
• B) Lower interest rates stimulate borrowing for investment, but discourage the use of retained earnings for investment.
• C) Lower interest rates reduce the opportunity cost of retained earnings, stimulating the use of these funds in investment.
• D) Lower interest rates have no effect on investment spending at all because investment spending is autonomous.

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Definitions:

Exponential Functions

Mathematical functions representing growth or decay at a constantly increasing or decreasing rate, often used in modeling population growth or radioactive decay.

Compound Interest

This refers to interest earned or paid on the initial amount of a deposit or loan, plus any interest that has accrued over time.

Present Value

Present value is the current worth of a future sum of money or stream of cash flows given a specified rate of return.

Percentage Calculation

The mathematical process of finding a percentage, which involves multiplying a value by a percent and dividing by 100.