Question 10(1 point)

Which of the following statements is true?

a

The expected rate of return is not a guaranteed rate of return. Investment carriesrisk.

b

Thereal interest rate(nominal rate - expected inflation) is thereal cost of investment.

c

The interest rate represents either the cost of borrowed funds or the opportunity cost of investing your own funds (which is forgone income).

d

All of the above.

e

Only a) and b)

Question 11(1 point)

Which of the following statements is true?

a

If the interest rate exceeds the expected rate of return, the investment should be made.

b

The investment demand curve shows an inverse relationship between the interest rate and the amount of investment.

c

As long as the expected return exceeds the interest rate, the investment is expected to be profitable.

d

All of the above.

e

Only b) and c)

Question 12(1 point)

Which of the following statements is true?

a

The investment demand curve shifts when any of its determinants (different from the interest rate) changes.

b

Greater expected returnscreate less investment demand, shifting the investment curve to the left.

c

Changes in expected returns happen for reasons such as changes in business taxes, technological progress, and expectations.

d

All of the above.

e

Only a) and c)