Four fundamental factors affect the cost of money: (1) the return that borrowers expect to earn on their investments. (2) the preference of savers to spend their income in the current period rather than delay their consumption until some future period. (3) the risks associated with the investment. (4) expected inflation.

Question

Archie

Business

3 June, 18:29

Four fundamental factors affect the cost of money: (1) the return that borrowers expect to earn on their investments. (2) the preference of savers to spend their income in the current period rather than delay their consumption until some future period. (3) the risks associated with the investment. (4) expected inflation.

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Answers (1)

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Yael Thomas · Answer 1

The correct options are 2 and 4.

Explanation:

The second option hints at the compensation that savers and investors must get in order to save and invest this is proximate by the rate of interest that they receive on their money saved and rate of return on investment.

A risk free asset guarantees and must give at least the rate of interest on savings and rate of return on investment.