In an ideal capital market:

Question

Quizplus · Accepted Answer

In an ideal capital market, the riskless rate of interest would be set by competitive market forces. This means that there would be no monopoly power or other external factors influencing the rate, and it would accurately reflect the time value of money and inflation expectations. However, options B, C, D, and E all describe unrealistic or unlikely scenarios. There would always be a spread of interest rates for ventures of different riskiness, there would never be a zero rate of interest, the net productivity of capital would fluctuate based on economic conditions, and the rent of land would depend on supply and demand factors.

In an Ideal Capital Market