M2 Is

question 315

Multiple Choice

M2 is

• A) smaller than M1.
• B) larger than M1.
• C) equal to M1, given full employment.
• D) equal to M1, but only when all three functions of money apply.

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Definitions:

Interest Rate Risk

The risk of loss to an investor from changes in the price of a bond that arise from changes in the market interest rate. Also called price risk and maturity risk.

Maturity Risk

Maturity risk pertains to the uncertainty and potential loss associated with holding a bond or other fixed-income investment until its maturity date.

Coupon

The percentage rate of interest a bond yields annually, based on its principal amount.

Current Yield

The annual return of an investment expressed as a percentage of its current price.