Use the Following to Answer Questions

question 18

Multiple Choice

Use the following to answer questions
Figure: Market for Loanable Funds

-(Figure: Market for Loanable Funds) If the interest rate is 3% in this market for loanable funds,then:

• A) investment exceeds savings by $200 million.
• B) investment exceeds savings by $100 million.
• C) borrowing demands exceed savings by $200 million.
• D) borrowing demands exceed savings by $100 million.

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Definitions:

Net Present Value

The current value of an investment's projected earnings, discounted at an appropriate interest rate, minus the initial capital cost.

Required Rate

The lowest return an investor is willing to accept on an investment to deem it as profitable.

Marginal Tax Rate

The rate at which the last dollar of a taxpayer's income is taxed, indicating the rate of tax that applies to their highest bracket of income.

Operating Cash Flow

Cash generated by a company's normal business operations, indicating whether a company is capable of generating sufficient positive cash flow to maintain and grow its operations.