Question

One of the four most fundamental factors that affect the cost of money as discussed in the text is the availability of production opportunities and their expected rates of return. If production opportunities are relatively good, then interest rates will tend to be relatively high, other things held constant.
a) true
b) false

Answer 1

Answer:

False

Explanation:

if there are relatively good production opportunities, there will be competition, price will come down and risk reduced. When the risk profile is improved based on good production opportunities, lenders will reduce interest rate. Risk is an important element in pricing, the lower the risk, the lower the price (interest rate) .