30 Questions
What is the difference in interest rates due to changes in macroeconomic variables, holding the intrinsic characteristics of securities constant?
Differences in interest rates over time
What is the relationship between inflation and interest rates?
Positive relationship
What does the real interest rate measure?
The percentage change in the buying power of a dollar
What happens to the demand for loanable funds when the economy is doing well?
It increases
What is the effect of a higher preference to consume today on the real interest rate?
It increases
What determines the real interest rate?
Consumer's relative time preference for consuming today rather than later
What is the expected outcome when the economy is doing well?
An increase in the quantity of loans made
What is the primary concern of default risk?
The risk that the issuer will not pay the interest and principal on a timely basis
According to the Liquidity Preference Theory, what should an investor demand for securities with long-term maturities?
A higher interest rate or premium
What is the effect of a tax-free bond on its interest rate compared to a taxable bond?
The interest rate is lower
What is the term used to describe the change in required interest rates as maturity changes?
Maturity premium
What is the nominal interest rate in the example where the annual inflation rate is 2%?
5%
What is the formula to compute the real interest rate using the Fisher equation?
[(1+0.05)/(1+0.02) – 1] x 100
What is the total amount repaid after 3 years if the principal is RM10,000 and the interest rate is 8% per annum?
RM12,400
What is the amount of interest to be paid by the student for the three years period if the loan is RM 18,000 and the annual interest rate is 6%?
RM3,240
What is the total amount paid for the loan if the loan is RM 18,000 and the interest is RM3,240?
RM21,240
What is the characteristic of a fixed rate?
An interest rate that does not fluctuate over time
What is the name of the rate that is similar to the Base Rate (BR) and Base Lending Rate (BLR)?
Fixed Rate
What is the primary function of the Overnight Policy Rate (OPR) set by Bank Negara Malaysia (BNM)?
To influence the overall monetary policy
What determines the Computed BLR for commercial banks?
Intervention rate / (1-SRR) x 0.8 + 2.25%
What is the key difference between the old reference rate framework and the new reference rate framework?
The replacement of BLR with Base Rate
What is the purpose of the Standardized Base Rate (SBR) introduced in 2022?
To provide a benchmark for pricing of new retail floating-rate loans
What is a key factor in determining the lending/financing rate in the new reference rate framework?
The spread
Which factor is a key determinant of interest rates in Malaysia?
Overnight Policy Rate
What benchmark has been used for lending rates in Malaysia?
Kuala Lumpur Interbank Offered Rate (KLIBOR)
How does an increase in the Overnight Policy Rate (OPR) affect borrowing costs in Malaysia?
Increases the base rate (BR)
What is the primary goal of Bank Negara Malaysia's (BNM) monetary policy when adjusting interest rates?
Achieving price stability
True or False: The Overnight Policy Rate (OPR) is set by Bank Negara Malaysia to control the exchange rate of the Malaysian Ringgit.
False
True or False: Inflation expectations have no impact on the decision-making of businesses and consumers in Malaysia.
False
True or False: The Kuala Lumpur Interbank Offered Rate (KLIBOR) is solely influenced by global economic conditions.
False
Understand the factors that influence interest rates, including macroeconomic variables and security-specific characteristics. Learn how inflation, term, and risk affect interest rates.
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