Final answer:
The interest rate investors demand for lending their money is typically known as the 'stated or contract rate of interest,' which is fixed in the lending agreement and doesn't account for compounding or the time value of money, unlike the effective rate. The correct option is C.
Step-by-step explanation:
The interest rate that investors demand for loaning their money is commonly referred to as the stated or contract rate of interest.
When you deposit money into a savings account at a bank, you earn an interest rate as a percentage of your deposited funds.
Correspondingly, when you seek a loan, for instance, to acquire a car or computer, you are obliged to pay interest on the borrowed amount based on this agreed stated or contract rate of interest.
The stated rate is what is agreed upon in the lending agreement and does not take into account the effects of compounding or the time value of money.
This differs from the effective rate of interest, which adjusts for these factors and represents the true economic cost of borrowing. The correct option is C.