a. The financial analysts at Lexmark have evaluated five major projects. Each project, if it actually goes forward, will be financed by going to a bank to borrow the money.
They've calculated a "break-even interest rate": If they can borrow cash to pay for the project at less than that rate, the project will likely be a success; if the rate is higher, then it's not worth it.
a. If the interest rate is 11%, which projects will Lexmark take on? If the market interest rate is 6%, which projects will it take on?
b. Let's turn this information into a demand curve for loanable funds. Organize this data to convert it into Lexmark's "loanable funds demand" curve.
