Question

In its annual report, Athletic Supply, Inc. includes the following five-year financial summary:

A) Revenue growth
B) Operating profit margin
C) Return on investment
D) All of the above

Answer 1

A rise in the supply of money in the financial market leads to a decline in interest rates, as lenders lower rates to attract borrowers in a market with increased capital availability.

Step-by-step explanation:

The question pertains to changes in the financial market that would lead to a decline in interest rates. In this context, the correct option is c. a rise in supply. To understand why, we can consider the basic principles of supply and demand. When there is an increase in the supply of money in the financial markets, assuming demand remains constant, the price of borrowing that money, which is reflected in the interest rates, tends to go down. This is because lenders have more capital to lend out, and to attract borrowers, they may lower the interest rates. On the contrary, if supply were to fall or if demand were to rise without a corresponding increase in supply, interest rates would likely increase as borrowers compete for available capital.In summary, a rise in the supply of money available for lending in the financial market tends to result in lower interest rates, as lenders are incentivized to reduce rates to make their loans more attractive in comparison to the increased availability of funds.