Final answer:
The correct answer to the question is B. the interest tax shield, which refers to the tax savings a firm gets from the tax deductibility of interest expenses.
Step-by-step explanation:
The tax savings attained by a firm from the tax deductibility of interest expense is called the interest tax shield. This financial concept reflects the reduction in taxable income for interest payments, leading to lower taxes owed.
Paying off debt faster than the minimum can result in considerable savings on interest, as interest can compound significantly over the life of a loan such as a 30-year mortgage.
Moreover, governments sometimes offer tax breaks to encourage higher savings, assuming that the supply curve for financial capital is sufficiently elastic, this can lead to a significant increase in the quantity of savings.