Asked by Kassi Stolz on Jun 18, 2024
Verified
In general, a firm will be unlikely to invest as long as the
A) interest rate is greater than the inflation rate.
B) firm has to borrow any money to make the investment.
C) profits realized from the investment are insufficient to cover the interest payments.
D) firm cannot sell bonds directly to the public and instead must borrow from a bank.
Interest Rate
The percentage of a sum of money charged for its use, typically expressed on an annual basis.
Inflation Rate
The percentage increase in the price level of goods and services in an economy over a period of time, typically measured annually.
Profits
The financial gains obtained when revenue from business activities exceeds expenses, costs, and taxes.
- Assess the impact of inflation and market volatility on investing patterns.
- Evaluate the influence of capital expenditure, encompassing interest charges and opportunity costs, on decisions related to investments.
Verified Answer
DF
Delvin FourcandJun 19, 2024
Final Answer :
C
Explanation :
A firm will be unlikely to invest if the profits from the investment are insufficient to cover the interest payments on the borrowed money used for the investment. This is because the cost of borrowing (interest payments) would exceed the returns from the investment, making it financially unviable.
Learning Objectives
- Assess the impact of inflation and market volatility on investing patterns.
- Evaluate the influence of capital expenditure, encompassing interest charges and opportunity costs, on decisions related to investments.