The loan-able funds theory is used to determine:
Correct answer: D. interest rate
- A. savings
- B. present valueGet Study Guides
- C. future value
- D. interest rate
Explanation
The loanable-funds theory explains how the interaction of saving and borrowing determines the equilibrium interest rate. Savings are a source of funds, not the principal variable determined by the theory.
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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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