1.Question 1Which of the following statements are true concerning borrowing decisions?1 pointBorrowing decisions are based on rational calculations and transactional analysisBorrowing decisions are based on rational calculations, transactional analysis, as well as psychological and social factorsBorrowing decisions can magnify returns but not lossesMost people in developed countries have more equity than debtWhen interest rates are at historic lows, it is a good idea to borrow

Factors Affecting Financing Decision

3. Discuss the advantages and disadvantages of both debt and equity finance.

Multiple Choice QuestionWhich of the following is true when the chance is high that a borrower will repay a loan?Multiple choice question.The lender will charge a higher interest rate.The lender will charge a lower interest rate. The borrower will charge a lower the interest rate.  The borrower will charge a higher interest rate.

Which of the following statements about interest rates according to the material covered in the lecture are TRUE:Interest rates on interest only loans are normally higher than principal and interest loans. Interest rates on residential investments loans (for investment properties) are also usually higher than for loans for owner-occupied homes.If variable interest rates are expected to increase in the future, choosing a variable interest rate on a new home loan will likely reduce your interest expenses compared to choosing a fixed interest rate on a new home loan.Question 10AnswerNeither of the statements are true (both are false)Only statement 1 is trueOnly statement 2 is trueBoth statements are true (neither are false)

Which one of the following statements is true?Group of answer choicesLow debt ratio means most of the assets are financed by debt.Low debt ratio means most of the assets are financed by equity.Too little debt will reduce the business’s long-term flexibility.High debt ratio means most of the assets are financed by equity.