Why is it useful to make a distinction between debt and equity instruments?
What will be an ideal response?
Debt instruments such as bonds and bank deposits are repaid regardless of economic circumstances. Equity instruments, like a share of stock, have a payoff that is linked to economic performances. However, remember the possibility of bankruptcy and the real return, which is subject to domestic currency fluctuations.
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Equilibrium in the money market exists when
A) at a given interest rate, excess supply of money is equal to the quantity demanded of money. B) at a given interest rate, excess demand for money is equal to the quantity demanded of money. C) the supply of money curve intersects the demand for money curve at the prevailing interest rate. D) b and c
A large aircraft manufacturer, like Boeing, may have a cost advantage over a new smaller manufacturer because of:
A. diseconomies of scale. B. economies of scale. C. diminishing returns to a fixed factor of production. D. the principal agent problem is generally less severe for larger firms.