You borrow $10,000 at an interest rate of 5% to open Movies Galore, a DVD rental store. You will earn an economic profit if

Question

Quizplus · Accepted Answer

In order to make an economic profit, the return on your investment should be greater than the cost of the borrowed funds (interest rate of 5%). Therefore, the best choice is option C as it states that the return on your investment must be greater than 5%. Options A and B would not result in an economic profit as the return on investment would not be enough to cover the cost of borrowing. Option D is too broad and it is not necessary for the return to be 10% or greater, as long as it is greater than 5%.

You Borrow $10,000 at an Interest Rate of 5% to Open