Mastering Interest Rates and Bond Valuation
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Questions and Answers

Which type of instrument is the interest rate usually applied to?

  • Bank loans
  • Debt instruments (correct)
  • Common stock
  • Equity instruments

    • What is the required return usually applied to?

  • Bank loans
  • Debt instruments
  • Common stock
  • Equity instruments (correct)

    • Which factor can influence the equilibrium interest rate?

  • Inflation
  • Risk
  • Liquidity preference
  • All of the above (correct)

    • What is inflation?

    <p>A rising trend in the prices of most goods and services</p> Signup and view all the answers

    What does liquidity preference refer to?

    <p>The general tendency of investors to prefer short-term securities</p> Signup and view all the answers

    Which type of instrument is the required return usually applied to?

    <p>Equity instruments</p> Signup and view all the answers

    What is the compensation paid by the borrower of funds to the lender called?

    <p>Interest rate</p> Signup and view all the answers

    What is the cost of borrowing funds from the borrower's point of view?

    <p>Interest rate</p> Signup and view all the answers

    What does risk lead investors to expect?

    <p>A higher return on investment</p> Signup and view all the answers

    What does liquidity preference refer to?

    <p>The tendency of investors to prefer short-term securities</p> Signup and view all the answers

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