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If a Firm Wants to Borrow $10 Million and the Real

Question 130

Multiple Choice

If a firm wants to borrow $10 million and the real interest rate increases from 5 percent to 6 percent, then the cost of the investment has increased by


A) $1 million per year.
B) $100,000 per year.
C) $6 million per year.
D) $600,000 per year.
E) nothing because the real interest rate is the return the firm will earn on its investment.

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