Which of the Following Factors Would Not Be Expected to Affect

question 6

Multiple Choice

Which of the following factors would not be expected to affect the nominal interest rate?

• A) The supply of loans
• B) The demand for loans
• C) The coupon rate on previously issued government bonds
• D) The expected rate of inflation
• E) Government spending and borrowing

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Definitions:

Security Market Line

A line that represents the relationship between the expected return of a market security and its risk, as measured by beta.

Market Rate

The market rate, often related to interest or exchange rates, is the prevailing rate determined by supply and demand dynamics in the open market.

Risk-free Rate

The theoretical rate of return on an investment with zero risk of financial loss, often represented by the yield on government securities.