Long-Term Interest Rates May Not Closely Follow Short-Term Interest Rates

question 31

Multiple Choice

Long-term interest rates may not closely follow short-term interest rates if

• A)People prefer to hold transactions accounts over cash.
• B)The required reserve ratio decreases.
• C)Lenders are reluctant to make loans.
• D)The Fed intervenes in the bond market.

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Definitions:

Short-term Note

A financial instrument typically due for repayment within one year, often used for short-term financing needs.

Long-term Debt

Refers to loans or other forms of financial obligations that are due for repayment beyond the next year or operating cycle.

Assets Financed

The acquisition of assets (e.g., equipment, property) using debt or other financial instruments rather than direct payment.

Debt To Equity Ratio

A financial ratio indicating the relative proportion of shareholder's equity and debt used to finance a company's assets.