Company 'A' plans to invest $10m on hotels, if the real interest rate is 8%, $12m if the real interest rate is 6%, $15m if the real interest rate is 4% and $18m if the real interest rate is 2%. Company ‘A’ expects to double its profits next year. If all other factors affecting demand remain stable, show by drawing the loan demand curve and explain how the increase in profits will affect the demand for debt funds.

Answer rating: 100% (QA)

An Increase in income leads to an increased supply of debt ... View the full answer