Assume that for the entire business sector of the economy there is $0 worth of investment projects which will yield an expected rate of return of 25 percent or more.But there are $15 worth of investments which will yield an expected rate of return of 20-25 percent;another $15 with an expected rate of return of 15-20 percent;and similarly an additional $15 of investment projects in each successive rate of return range down to and including the 0-5 percent range.
-Refer to the above information.If the real interest rate is 5 percent,what amount of investment will be undertaken?
A) $15
B) $30
C) $45
D) $60

Question

Quizplus · Accepted Answer

If the real interest rate is 5 percent, all investment projects with an expected rate of return greater than 5 percent will be undertaken. This includes all projects from the 5-10 percent range up to the 20-25 percent range, totaling $60 ($15 for each range).

Assume That for the Entire Business Sector of the Economy