Exploring Economics
Exploring Economics
8th Edition
ISBN: 9781544336329
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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(d) Suppose A&K Sound System is considering building a record studio in Cayman Islands.

(i) Assume that A&K Sound System needs to borrow money on the bond market. Why

would an increase in interest rates affect the decision of whether to build the studio?

(ii) If A&K Sound System has enough of its funds to finance the new studio without

borrowing, would an increase in interest still affect the decision about whether to

build the studio? Explain your answer.

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