If the Interest Rate on a Loan Is Lower Than

question 157

Multiple Choice

If the interest rate on a loan is lower than the expected return from an investment,

• A) a rational firm will take out a loan for the investment.
• B) the Federal Reserve will conduct contractionary monetary policy.
• C) a rational firm will not take out a loan for the investment.
• D) the Federal Reserve will conduct expansionary monetary policy.
• E) the government will conduct expansionary fiscal policy.

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Definitions:

Amortized

The process of paying off debt through regular payments over a set period, where the payments cover both principal and interest.

First Three Years

Referring to the initial period of three years from a specific start point, often used in the context of forecasting, planning, or analyzing early-stage performance.

Compounded Monthly

The process of calculating interest on both the initial principal and the accumulated interest from previous periods, done once per month.

Principal Repaid

The amount of the original loan paid back, excluding interest or additional fees.