Question

The interest rate represents ________ to ________ and ________ to ________.

A) Profit; foreign entities; the cost of funds; savers

B) The cost of funds; corporations; a return; governments

C) Profit; governments; the marginal rate of arbitrage; foreign entities

D) The cost of borrowing; firms and governments; a reward to saving; households

E) Profit; arbitrage companies; loss; firms

Answer 1

Correct option is (D).

In the financial market, households save money against which they get interest, and firms & governments borrow money against which they pay interest. So interest rate is a return to saving for households, and cost of borrowing for firms & government.