A finance company's cash flows are _____ related to changes in economic growth and may be ____ related to changes in the risk-free rate.

Question

Quizplus · Accepted Answer

A finance company's cash flows are typically positively related to changes in economic growth because as the economy grows, businesses and consumers are more likely to borrow and invest, increasing the company's revenues. They may be inversely related to changes in the risk-free rate because as the risk-free rate increases, the cost of borrowing can increase, potentially reducing demand for loans and negatively impacting the company's cash flows.

A Finance Company's Cash Flows Are _____ Related to Changes