Retrieving "Investment Opportunities" from the archives
Cross-reference notes under review
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Capital Formation
Linked via "investment opportunities"
Financing Capital Formation
The transition from savings to investment requires efficient financial intermediation. Capital markets facilitate this by matching those with surplus funds to those with productive investment opportunities.
The Role of Interest Rates -
Opportunity Cost
Linked via "investment opportunities"
Application in Decision Theory
In rational decision-making, an agent seeks to maximize utility or profit by ensuring that the marginal benefit of the chosen action exceeds its marginal opportunity cost. When evaluating investment opportunities, for example, the expected return on Project X must surpass the expected return on the highest-yielding, available alternative project, Project Y.
The standard decision rule is: Accept O…