If the Risk of Buying U

question 43

Multiple Choice

If the risk of buying U.S.assets rises because it is discovered that lending institutions had not carefully evaluated borrowers prior to lending them funds,then

• A)the real exchange rate and the interest rate will rise.
• B)the real exchange rate will rise and the interest rate will fall.
• C)the real exchange rate will fall and the interest rate will rise.
• D)the real exchange rate and the interest rate will fall.

---

Definitions:

Limited Liability Corporation

An organizational form that integrates the single-level taxation characteristic of partnerships and sole proprietorships with the protective limited liability feature of corporations.

Debt Financing

Acquiring funds for business activities by borrowing money, typically through loans or by issuing bonds, that must be repaid with interest.

Entrepreneurial Start-Up

A newly founded company with innovative business ideas aimed at addressing unmet market needs or offering new solutions.

Equity Financing

The method of raising capital by selling company shares to investors; in return, investors receive ownership interests in the company.