Reference no: EM13140215

In a free economy, capital from providers with available funds is allocated through the price system to users that have a demand for funds. The interaction of the providers' supply and the users' demand determines the cost (or price) of money, which is the rate users pay to providers. For debt, we call this price the interest rate. For equity, we call this price the cost of equity. Discuss the four most fundamental factors affecting the cost of money.