Asked by Riley Jackson on Apr 29, 2024
Verified
Most businesses would probably not undertake investment projects for which the going rate of interest were
A) greater than the expected rate of profit.
B) equal to the expected rate of profit.
C) less than the expected rate of profit.
Investment Projects
Initiatives undertaken by individuals, firms, or governments involving the allocation of resources with the expectation of future returns.
Interest Rate
The fraction of a total sum charged for borrowing it, often shown as a rate per year.
Expected Rate of Profit
Expected profits divided by money invested.
- Recognize the effects of interest rates on business investment decisions.
Verified Answer
MT
Megan TrainorMay 03, 2024
Final Answer :
A
Explanation :
If the going rate of interest were greater than the expected rate of profit, it would not be profitable for a business to invest in a project, as they would end up paying more in interest than they would earn in profit. Therefore, most businesses would not undertake investment projects with such unfavorable conditions.
Learning Objectives
- Recognize the effects of interest rates on business investment decisions.