An Increase in the Interest Rate Leads to an Increase

question 285

True/False

An increase in the interest rate leads to an increase in the quantity demanded to borrow.

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Definitions:

London Interbank Offer Rate (LIBOR)

The rate most international banks charge one another for overnight Eurodollar loans.

Note Issuance Facility (NIF)

Large borrowers issue notes up to one year in maturity in the Euromarket. Banks underwrite or sell notes.

Forward Exchange Rate

An agreed-upon exchange rate for currencies to be exchanged on a predetermined future date, used to hedge against currency market fluctuations.

Interest Rate Parity (IRP)

The condition stating that the interest rate differential between two countries is equal to the difference between the forward exchange rate and the spot exchange rate.