Assume There Are No Investment Projects That Will Produce an Expected

Assume there are no investment projects that will produce an expected rate of return of 8 percent or more. There are, however, $2 billion worth of investment projects with an expected rate of return at 7 percent, an additional $2 billion for every drop of the interest rate by 1 percent. If the real interest rate is 3 percent in this economy, the cumulative amount of investment at the 3 percent or higher rate of return is:

A) $10 billion
B) $8 billion
C) $6 billion
D) $4 billion

Correct Answer:

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