Identify the correct statement about the market interest rate.

Question

Quizplus · Accepted Answer

The market interest rate represents the opportunity cost of investing with either borrowed funds or savings. It is the price paid for the use of borrowed funds and is determined by the supply and demand for loanable funds in the market. The demand for loanable funds is directly related to the market interest rate, as the cost of borrowing increases with the interest rate. The supply of loanable funds is indirectly related to the market interest rate, as individuals and institutions are more likely to save and invest at higher interest rates. The market interest rate also has an impact on a firm's investment decision, regardless of whether they use borrowed funds or savings, as it affects the cost of capital and the expected return on investment.

Identify the Correct Statement About the Market Interest Rate