If the risk of a financial security increases and the supply curve shifts left, what happens to the equilibrium interest rate?

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Increases - When the risk of a financial security increases, lenders become more cautious and reduce the supply of funds. This shifts the supply curve leftward, making funds scarce. As a result, the equilibrium interest rate rises to compensate for the higher risk.

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If the risk of a financial security increases and the supply curve shifts left, what happens to the equilibrium interest rate?

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MCQ Detailed View

If the risk of a financial security increases and the supply curve shifts left, what happens to the equilibrium interest rate?

Detailed Explanation

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In cash flow analysis, two projects are compared using a common life approach, which is classified as…

In capital budgeting, the Internal Rate of Return (IRR) of a project is classified as its ____________?…

In evaluating independent projects, the results of Internal Rate of Return (IRR) and Net Present Value…