Question

Suppose that Intel is considering building a new chip-making factory. Assuming that Intel needs to borrow money in the bond market, an increase in interest rates makes it likely that Intel will build the new factory. True or False: If Intel has enough of its own funds to build the new factory without borrowing, an increase in interest rates still affects Intel’s decision about whether to build the factory. True False

Answer 1

Assuming that Intel needs to borrow money in the bond market, an increase in interest rates makes it likely that Intel will build the new factory

This statement is false because an increase in interest rates will make it less likely that intel builds a new factory because it will be more costly to borrow money when interest rates are higher.

If Intel has enough of its own funds to build the new factory without borrowing, an increase in interest rates still affects Intel’s decision about whether to build the factory.

This statement is True because if interest rates increase Intel may choose to lend out the money if the interest rates are higher than the return on making the factory.

Step-by-step explanation: