The Market Interest Rate Is Important to the Investment Decision

question 86

Multiple Choice

The market interest rate is important to the investment decision of firms:

• A)only when funds are borrowed from financial intermediaries.
• B)only when firms have the money to invest in capital.
• C)regardless of whether funds must be borrowed or firms have the funds on hand.
• D)only when firms have funds on hand and are ready to lend them.
• E)only when firms purchase new equipment rather than a new building.

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Definitions:

Opportunity Cost

The benefit that is missed or given up when choosing one alternative over another.

Hour

A unit of time equal to 60 minutes.

Opportunity Cost

Skipping over the possibility of gain from multiple options by deciding on a single one.

Opportunity Cost

The cost of choosing one option over alternative uses of resources or opportunities.