Final answer:
Without Table 4.6, we cannot determine the quantity of savings at an 8 percent interest rate. Equilibrium interest rate and quantity occur where the supply of savings meets the demand for borrowing. A firm should not invest if the return is less than the interest rate it would pay on a loan.
Step-by-step explanation:
At an 8 percent interest rate, the quantity of savings in a market for loans to purchase homes is not provided in your question. To determine this, you would have to reference Table 4.6 that presumably provides the data for savings and borrowing at various interest rates. In a market, the equilibrium interest rate and quantity of savings and borrowing occur where the supply curve (amount of savings) intersects with the demand curve (amount of borrowing).
If the supply curve shifts due to a change in the perceptions of foreign investors, resulting in $10 million less supplied at every interest rate, the new equilibrium can be found by determining where the new supply curve intersects with the unchanged demand curve. Because the supply of savings has decreased, we would expect the equilibrium interest rate to rise to balance out the decreased supply with the current demand. A higher interest rate will incentivize more savings, balancing out the decrease in supply caused by the shift in foreign investors' perceptions.
In the scenario described in Problem 39, the firm should not make the investment if they can only earn a 6% return when the market interest rate for borrowing is 8%. This is because if the firm borrowed money, it would pay more in interest than it would earn from the investment. Since the firm has cash on hand, it could choose to make the investment, but the principle of opportunity cost suggests that it could be detrimental - the firm could earn more by investing its cash elsewhere at a rate higher than 8%.