Fiscal Policy Affects

question 14

Multiple Choice

Fiscal policy affects:

• A)both the supply and demand for a currency.
• B)the demand for a currency but not the supply.
• C)the supply of a currency but not the demand.
• D)neither the supply of a currency nor the demand.

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Definitions:

Reinvestment Rate Risk

Reinvestment Rate Risk is the risk that the returns from reinvesting cash flows will be lower than initially anticipated due to changes in interest rates.

Annual Interest Payment

The total amount of interest paid on a bond or loan over the course of a year.

Coupon Rate

The percent of the face value paid as interest on a bond every year.

Yield To Maturity

Yield to maturity is the total return anticipated on a bond if the bond is held until its maturity date, accounting for its current market price, par value, coupon interest rate, and time to maturity.