When the RBA Wants to Signal the Public About the Direction

question 50

Multiple Choice

When the RBA wants to signal the public about the direction of monetary policy, it will likely use:

• A) the overnight cash rate.
• B) the T- bill rates.
• C) the discount rate.
• D) the federal funds rate.
• E) the commercial paper rates.

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Definitions:

Cost of Debt

The effective rate that a company pays on its current debt as part of its capital structure.

Debt-Equity Ratio

The financial ratio reflects how shareholders' equity and debt equally contribute to asset financing.

Yield-To-Maturity

An estimate of the total return expected on a bond if the bond is held until the date it matures.

WACC

Weighted Average Cost of Capital; a calculation of a firm's cost of capital in which each category of capital is proportionately weighted.