When the Cost of Borrowing Funds That Is Stated on a Loan

question 53

Multiple Choice

When the cost of borrowing funds that is stated on a loan is adjusted for the effects of inflation,the resulting interest rate is called the

• A) prime interest rate.
• B) nominal interest rate.
• C) real interest rate.
• D) core PCE interest rate.

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Definitions:

Opportunity Costs

The cost of foregoing the next best alternative when making a decision.

Financing Costs

Expenses a company pays to borrow funds or raise capital through equity, including interest payments, fees, and other charges.

Depreciation Costs

The allocation of the cost of an asset over its useful life, reflecting the decrease in value due to wear and use.

Cost Of Capital

The rate of return that a company must offer investors to finance its assets, often used in making investment decisions.