Interest Rates Determinants
30 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the difference in interest rates due to changes in macroeconomic variables, holding the intrinsic characteristics of securities constant?

  • Term structure of interest rates
  • Interest rate spread
  • Real interest rate
  • Differences in interest rates over time (correct)

    • What is the relationship between inflation and interest rates?

  • Inverse relationship
  • Positive relationship (correct)
  • No relationship
  • Negative relationship

    • What does the real interest rate measure?

  • The rate of inflation
  • The rate of return on an investment
  • The percentage change in the buying power of a dollar (correct)
  • The time value of money

    • What happens to the demand for loanable funds when the economy is doing well?

    <p>It increases</p> Signup and view all the answers

    What is the effect of a higher preference to consume today on the real interest rate?

    <p>It increases</p> Signup and view all the answers

    What determines the real interest rate?

    <p>Consumer's relative time preference for consuming today rather than later</p> Signup and view all the answers

    What is the expected outcome when the economy is doing well?

    <p>An increase in the quantity of loans made</p> Signup and view all the answers

    What is the primary concern of default risk?

    <p>The risk that the issuer will not pay the interest and principal on a timely basis</p> Signup and view all the answers

    According to the Liquidity Preference Theory, what should an investor demand for securities with long-term maturities?

    <p>A higher interest rate or premium</p> Signup and view all the answers

    What is the effect of a tax-free bond on its interest rate compared to a taxable bond?

    <p>The interest rate is lower</p> Signup and view all the answers

    What is the term used to describe the change in required interest rates as maturity changes?

    <p>Maturity premium</p> Signup and view all the answers

    What is the nominal interest rate in the example where the annual inflation rate is 2%?

    <p>5%</p> Signup and view all the answers

    What is the formula to compute the real interest rate using the Fisher equation?

    <p>[(1+0.05)/(1+0.02) – 1] x 100</p> Signup and view all the answers

    What is the total amount repaid after 3 years if the principal is RM10,000 and the interest rate is 8% per annum?

    <p>RM12,400</p> Signup and view all the answers

    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%?

    <p>RM3,240</p> Signup and view all the answers

    What is the total amount paid for the loan if the loan is RM 18,000 and the interest is RM3,240?

    <p>RM21,240</p> Signup and view all the answers

    What is the characteristic of a fixed rate?

    <p>An interest rate that does not fluctuate over time</p> Signup and view all the answers

    What is the name of the rate that is similar to the Base Rate (BR) and Base Lending Rate (BLR)?

    <p>Fixed Rate</p> Signup and view all the answers

    What is the primary function of the Overnight Policy Rate (OPR) set by Bank Negara Malaysia (BNM)?

    <p>To influence the overall monetary policy</p> Signup and view all the answers

    What determines the Computed BLR for commercial banks?

    <p>Intervention rate / (1-SRR) x 0.8 + 2.25%</p> Signup and view all the answers

    What is the key difference between the old reference rate framework and the new reference rate framework?

    <p>The replacement of BLR with Base Rate</p> Signup and view all the answers

    What is the purpose of the Standardized Base Rate (SBR) introduced in 2022?

    <p>To provide a benchmark for pricing of new retail floating-rate loans</p> Signup and view all the answers

    What is a key factor in determining the lending/financing rate in the new reference rate framework?

    <p>The spread</p> Signup and view all the answers

    Which factor is a key determinant of interest rates in Malaysia?

    <p>Overnight Policy Rate</p> Signup and view all the answers

    What benchmark has been used for lending rates in Malaysia?

    <p>Kuala Lumpur Interbank Offered Rate (KLIBOR)</p> Signup and view all the answers

    How does an increase in the Overnight Policy Rate (OPR) affect borrowing costs in Malaysia?

    <p>Increases the base rate (BR)</p> Signup and view all the answers

    What is the primary goal of Bank Negara Malaysia's (BNM) monetary policy when adjusting interest rates?

    <p>Achieving price stability</p> Signup and view all the answers

    True or False: The Overnight Policy Rate (OPR) is set by Bank Negara Malaysia to control the exchange rate of the Malaysian Ringgit.

    <p>False</p> Signup and view all the answers

    True or False: Inflation expectations have no impact on the decision-making of businesses and consumers in Malaysia.

    <p>False</p> Signup and view all the answers

    True or False: The Kuala Lumpur Interbank Offered Rate (KLIBOR) is solely influenced by global economic conditions.

    <p>False</p> Signup and view all the answers

    More Like This

    International Finance
    3 questions

    International Finance

    UserReplaceableConsciousness avatar
    UserReplaceableConsciousness
    Macroeconomics Quiz on Interest Rates and Government Spending
    18 questions

    Macroeconomics Quiz on Interest Rates and Government Spending

    TopsRoentgenium avatar
    TopsRoentgenium
    Economics: Interest Rate Determination
    30 questions

    Economics: Interest Rate Determination

    PreferableOcarina avatar
    PreferableOcarina
    Understanding Inflation Rate
    8 questions

    Understanding Inflation Rate

    WiseFauvism avatar
    WiseFauvism
    Use Quizgecko on...
    Browser
    Open
    Browser
    Browser