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If the interest rate they pay on the borrowed money is lower than the interest rate they get from sitting on their cash, spending the cash has marginal cost equ
by kwantam 15y ago
If the interest rate they pay on the borrowed money is lower than the interest rate they get from sitting on their cash, spending the cash has marginal cost equal to the difference between the rates.
It always makes sense to borrow if the return on your cash is greater than the interest on the loan.
- dkarl 15y agoI see -- so they aren't borrowing so they have more money to spend on their own projects; they're borrowing so they have more money to put in higher-yielding investments. I guess that's just a perk of being such a good credit risk.