If the risk of financial security decreases and the supply curve shifts to the right and downwards then the impact on equilibrium of interest rate must ____________?
Correct answer: C. decreases
- A. remain constant
- B. fluctuate
- C. decreases
- D. increases
Explanation
Lower financial-security risk encourages lenders to supply more funds, shifting the supply curve rightward and downward. The increased supply lowers the equilibrium interest rate.
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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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