What is the Cost of Capital? | Forex Trading Explained

It is no secret that the cost of capital plays an important role in the success of any business. In particular, the decisions of investors and other financial professionals hinge on the cost of capital, as it often determines the return they can expect on their investments. For traders in the foreign exchange (Forex) market, the cost of capital is also an important factor to consider when trading. In this article, we will explore what the cost of capital is and how it affects Forex trading. The cost of capital typically refers to the necessary rate of return that a company needs to cover its cost of borrowing funds. This rate is usually calculated as a weighted average cost of capital (WACC) based on the mix of different sources of capital used to fund a company’s operations, such as equity, debt, and preferred stock.