Asked by Sukhkaran Dhaliwal on May 12, 2024
Verified
Most businesses would probably not undertake investment projects for which the expected rate of profit were
A) greater than the going interest rate.
B) one percent more than the going interest rate.
C) equal to the going interest rate.
D) less than the going interest rate.
Expected Rate
The projected or anticipated rate of return on an investment over a specific period.
Profit
The financial gain realized when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes needed to sustain it.
- Perceive the significance of interest rates in shaping decisions on investments and the cost associated with unsought alternatives.
Verified Answer
CR
Calliyah ReneeMay 13, 2024
Final Answer :
D
Explanation :
Businesses would typically expect a rate of return that is higher than the going interest rate in order to cover the risks and opportunity costs associated with the investment. Therefore, any investment project with an expected rate of profit less than the going interest rate would not be attractive to most businesses.
Learning Objectives
- Perceive the significance of interest rates in shaping decisions on investments and the cost associated with unsought alternatives.