If the rate of return is lower than the cost of borrowing the:
A) investor will lose money on net after paying back the loan.
B) investor should take out the loan.
C) borrower will make money by taking out the loan.
D) savers will lose out by taking a loan.

Question

Quizplus · Accepted Answer

If the rate of return is lower than the cost of borrowing, it means that the investor will have to pay more in interest than they are earning in returns. This will result in a net loss, making it a poor financial decision to take out the loan.

If the Rate of Return Is Lower Than the Cost