Answer to Question #251075 in Financial Math for Millicent

Question

Investment decisions cannot be affected by

Select one:

a. Expected rate of return

b. Cost of capital goods

c. Interest rate

d. None of the options are correct

Answer 1

The expected return is the profit or loss that an investor anticipates on an investment - decisions is affected

Capital goods are physical assets that a company uses in the production process to manufacture products and services that consumers will later use. Capital goods include buildings, machinery, equipment, vehicles, and tools. Capital goods are not finished goods, instead, they are used to make finished goods.

The real interest rate reflects the rate of time-preference for current goods over future goods.

Factors affecting investment

• Interest rates (the cost of borrowing)
• Economic growth (changes in demand)
• Confidence/expectations.
• Technological developments (productivity of capital)
• Availability of finance from banks.
• Others (depreciation, wage costs, inflation, government policy)

Answer: d. None of the options are correct.