If the demand of loanable demands increases then the borrowing cost of funds is ___________?
Correct answer: A. higher
- A. higher
- B. zero
- C. upside
- D. lower
Explanation
An increase in demand for loanable funds puts upward pressure on the equilibrium interest rate, which is the borrowing cost of funds. Therefore the cost becomes higher.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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