Question

Investment interest expense includes: Multiple Choice

A.interest expense from loans to purchase stocks.
B.interest expense from loans to purchase corporate bonds and interest expense from loans to purchase stocks.
C.interest expense from loans to purchase corporate bonds.
D.interest expense from loans to purchase municipal bonds and interest expense from loans to purchase corporate bonds.
E.interest expense from loans to purchase municipal bonds.

Answer 1

Investment interest expense refers to the interest costs incurred when borrowing funds to purchase investments like stocks and corporate bonds. Lower interest rates encourage investment spending, whereas higher rates may deter it.

Step-by-step explanation:

Investment interest expense includes the cost of borrowing money to finance the purchase of income-producing assets. When a firm or an individual borrows money to invest in stocks or bonds, they incur interest expenses on those loans. In regard to the provided multiple-choice question, the correct answer is that investment interest expense includes B.interest expense from loans to purchase corporate bonds and interest expense from loans to purchase stocks.

Interest rates greatly influence the decision-making process regarding investments. Lower interest rates usually stimulate investment spending because they reduce the cost of borrowing, while higher interest rates can discourage investment by increasing the opportunity cost of spending the capital.