Return on Equity Increases When the Expected Rate of Return

question 5

Short Answer

Return on equity increases when the expected rate of return from the acquired assets is ________than the rate of interest on the bonds used to finance the asset acquisition.

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Definitions:

Inflation Rate

A general rise in prices for goods and services across an economy over a certain timeframe.

Nominal

Nominal values refer to monetary values or economic statistics not adjusted for inflation, reflecting their face value.

Real Interest Rate

The interest rate corrected for the effects of inflation.