High interest rates increase the cost of borrowing money, which makes capital investments more expensive. As a result, companies may choose to delay or forego these investments, which increases the opportunity costs of making them. Therefore, high interest rates increase the opportunity costs of capital investments.

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High Interest Rates

Question 150

Multiple Choice

High interest rates

A) increase the profitability of capital investments.
B) decrease the opportunity costs of capital investments.
C) increase the opportunity costs of capital investments.
D) decrease the profitability of current sales.

Correct Answer: