Table 92 -Refer to Table 9

question 67

Multiple Choice

Table 9.2
$$\begin{array} { | l c | } \hline \text { Cost of machine } & \$ 300,000 \\\hline \text { Arnual autput from mechine } & \$ 35,000 \\\hline \text { Arnual interett rate on loans } & 9 \% \\\hline\end{array}$$
-Refer to Table 9.2. If a firm purchases the machine by taking out a one-year loan, what happens to the firm's rate of return on the investment if the interest rate increases to 10 percent?

• A) It increases to 1.5 percent
• B) It increases to 0.15 percent
• C) It decreases to 1.5 percent
• D) It decreases to 1.7 percent
• E) It decreases to 0.17 percent

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Definitions:

Housing Bust

A rapid and significant decline in the housing market, characterized by falling home prices and increased foreclosures.

Regulatory Policies

Laws and rules instituted by governments to control or manage certain activities, industries, or market practices.

Mal-investment

Investment in wrong or unproductive activities usually due to poor information, misaligned incentives, or manipulation of prices.

Adjustable Rate Mortgages

A type of mortgage in which the interest rate applied on the outstanding balance varies throughout the life of the loan.