Assume That the Risk-Free Interest Rate in the U

question 10

Multiple Choice

Assume that the risk-free interest rate in the U.S. is the same as that in Country M. Assume that the government of Country M is more likely to rescue local firms that experience financial problems. Other things being equal, Country M's firms are likely to use a ____ degree of financial leverage than U.S. firms. If a firm based in Country M had the same degree of financial leverage and the same operating characteristics as a U.S. firm, its cost of capital would be ____ than that of the U.S. firm.

• A) higher; higher
• B) higher; lower
• C) lower; lower
• D) lower; higher

---

Definitions:

Achievement Test

An exam that measures a person's knowledge or proficiency in a certain area.

Legal Right

An entitlement or permission recognized and enforced by a legal system, allowing an individual to act in a certain way.

Creative Intelligence

The ability to produce new ideas, solutions, and approaches to solve problems or to create artistic expressions.

Adaptive Responses

The reactions organisms make to adjust to new or changing environments, promoting survival and efficiency.