In making an investment decision, a business firm is most interested in the
A) nominal interest rate.
B) real interest rate.
C) nominal interest rate minus the real interest rate.
D) future supply of loanable funds.

Question

Quizplus · Accepted Answer

A business firm is most interested in the real interest rate because it reflects the true cost of borrowing by adjusting for inflation. The nominal interest rate does not take into account inflation and can be misleading. It is the real interest rate that affects the decision to invest because it is the cost of borrowing that affects the profitability of the investment.

In Making an Investment Decision, a Business Firm Is Most