When Do Firms Buy Capital Goods

question 81

Multiple Choice

When do firms buy capital goods?

• A) when firms have sufficient funds and can afford the capital goods
• B) when firms have to borrow funds to buy the capital goods
• C) when firms expect the investment to yield a higher return than other possible uses of their funds
• D) when firms grow more optimistic about current profit prospects
• E) when the capital good has a long productive life

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Definitions:

Compounded Quarterly

Interest calculated four times a year on both the initial principal and the accumulated interest from previous periods.

Amortized Over

The process of paying off a debt over time through regular payments, which cover both principal and interest.

Compounded Monthly

This involves the addition of interest to the principal sum of a deposit or loan each month, affecting the total interest accrued over time.

Compounded Quarterly

Interest calculated on an investment or loan on a quarterly basis where the interest is added to the principal, resulting in interest on interest for the next quarter.