The Interest Rate Paid on Bonds Increases from 4% to 7%.This

question 129

Multiple Choice

The interest rate paid on bonds increases from 4% to 7%.This will cause

• A)no change in the optimal balance of money because checking deposits don't earn interest.
• B)the optimal balance of money to increase because it raises the opportunity costs of holding money.
• C)the optimal balance of money to decrease because it raises the opportunity cost of holding money.
• D)the optimal balance of money to increase because it reduces the opportunity cost of holding money.

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Definitions:

Expensed

Costs or charges incurred during a specific period that are recorded immediately against revenues, reducing profit.

Depreciable Amount

The cost of a tangible or intangible asset, less its salvage value, over which the cost is systematically allocated over its useful life.

Residual Value

is the estimated value that an asset will retain at the end of its useful life.

Property, Plant & Equipment

Tangible long-lived assets owned by a business for the purpose of producing goods or services and not intended for sale during the normal course of business.