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Use the following to answer questions
Figure: Loanable Funds Contraction
Use the following to answer questions  Figure: Loanable Funds Contraction   -(Figure: Loanable Funds Contraction) In the accompanying figure,if the supply of loanable funds decreases from S<sub>LF </sub>to S<sup>1</sup><sub>LF</sub> and the demand for loanable funds remains at D<sub>LF</sub>,the equilibrium interest rate will: A)  increase to i<sub>1</sub>. B)  remain at i<sub>0</sub>. C)  fall to i<sub>2</sub>. D)  increase or decrease temporarily and then return to i<sub>0</sub>.
-(Figure: Loanable Funds Contraction) In the accompanying figure,if the supply of loanable funds decreases from SLF to S1LF and the demand for loanable funds remains at DLF,the equilibrium interest rate will:


Definitions:

Current Yield

The annual income (interest or dividends) divided by the current price of the security, usually expressed as a percentage.

Bond A

A type of fixed-income investment representing a loan made by an investor to a borrower, typically corporate or governmental.

Bond B

An investment product representing a loan made by an investor to a borrower, typically corporate or governmental, with specific terms for interest payments and principal return.

Yield To Maturity

The total return anticipated on a bond if the bond is held until its maturity date.

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