2-20
FINANCIAL MARKETS AND INTEREST RATES
ANSWER KEY
4.
Select two basic market characteristics that influence the level of interest rates.
a) Investors' expected rate of return
d) Preference of potential investors for consumption versus savings
5.
The offered rate of interest reflects the pure interest rate plus:
c) a premium for the expected future rate of inflation plus a premium for
counterparty, liquidity, and interest rate risk.
6.
When planning their investment / borrowing strategies, investors and issuers look at
the yield curve representing the term structure of interest rates to:
a) determine their preference for long-or short-term securities.