1.The real rate of interest is...

A. a return that compensates investor for giving up their capital and for the loss of purchasing power due to inflation.

B. a return that compensates investors for inflation, for possible default, for potential liquidity problems, and for the length of a loan's maturity.

C.a return that makes it worth while for investors to supply capital to the market and wait to be repaid. It's like a rate for renting out capital.

2. Capital budgeting is...

A. The process of determining how much debt and equity the firm should have in its capital structure.

B.The process of? planning, evaluating,? selecting, and managing the financing of long?term operating projects of the company

C.The process of analyzing and evaluating the best way to invest the firm's surplus cash in order to earn additional returns until that cash is needed for other opportunities.