Other Things the Same,which of the Following Would Both Make

question 172

Multiple Choice

Other things the same,which of the following would both make foreigners more willing to engage in U.S.portfolio investment?

• A)U.S.interest rates rise,the default risk of U.S.assets rise
• B)U.S.interest rates rise,the default risk of U.S.assets fall
• C)U.S.interest rates fall,the default risk of U.S.assets rise
• D)U.S.interest rates fall,the default risk of U.S.assets fall

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Definitions:

Stock Repurchase

An action taken by a corporation to repurchase its own shares from the market, thereby decreasing the total number of shares available.

Residual Dividend Policy

A financial strategy where dividends paid to shareholders are based on the earnings left after all operational and capital expenses, as well as growth investments, have been covered.

Target Capital Structure

The mix of debt, preferred stock, and common equity that a company aims to hold to minimize its cost of capital and maximize its market value.

Forecasted Net Income

Forecasted net income is an estimate of a company's future profits after all expenses and taxes have been subtracted from revenues.