Asked by Khaly Barry on May 30, 2024
Verified
A firm considering whether to borrow money to purchase a capital good will compare the rate of interest for the loan with the
A) opportunity cost of the capital good.
B) rate of return on the investment.
C) length of the investment.
D) Treasury bill rate.
Capital Good
Long-lasting goods that businesses use to produce goods and services, contributing to their productive capacity.
Rate Of Interest
The percentage charged on the total amount of borrowed money or paid on invested capital.
- Comprehend the correlation between interest rates, investment choices, and the demand for borrowable funds.
- Understand how fluctuations in interest rates influence the actions of borrowers and lenders within the market.
Verified Answer
MB
Megga BbeautyyJun 05, 2024
Final Answer :
B
Explanation :
The firm will compare the rate of interest for the loan with the rate of return on the investment to determine if the investment will generate enough returns to cover the cost of borrowing and provide a profit.
Learning Objectives
- Comprehend the correlation between interest rates, investment choices, and the demand for borrowable funds.
- Understand how fluctuations in interest rates influence the actions of borrowers and lenders within the market.