A borrower finds that the incremental cost of borrowing an extra $10,000 is 14%.The borrower can earn 12% on alternative investments of comparable risk so he would be better off by not borrowing the extra 14%.

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The borrower would be better off not borrowing the extra $10,000 because the incremental cost of borrowing (14%) is greater than the return they could earn on alternative investments (12%).

A Borrower Finds That the Incremental Cost of Borrowing an Extra