The rate of return to new capital is that market rate of interest at which it would just pay to invest.

Question

Quizplus · Accepted Answer

The rate of return to new capital is based on the market rate of interest, and it is the rate at which it would make sense to invest in new capital. If the market rate of interest is higher than the rate of return to new capital, then it wouldn't make sense to invest in new capital. However, if the market rate of interest is lower than the rate of return to new capital, then it would be profitable to invest in new capital.

The Rate of Return to New Capital Is That Market