Market Interest Rates Have Risen Substantially in the Five Years

question 32

Multiple Choice

Market interest rates have risen substantially in the five years since an investor purchased Treasury bonds that were offering a 7 percent return.If the investor sells now she is likely to receive:

• A)greater than a 7 percent total return.
• B)less than a 7 percent total return.
• C)a 7 percent total rate of return.
• D)a 7 percent nominal return but less than a 7 percent real return.

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Definitions:

Secured Loan

A loan that requires collateral as security for the lender.

Collateral

Assets that a borrower offers to a lender to secure a loan, which can be seized if the borrower fails to repay the loan.

SBA Loan

A loan made to a small business through a commercial bank, of which a portion is guaranteed by the Small Business Administration.

Commercial Bank

A financial institution that provides services such as accepting deposits, providing business loans, and offering basic investment products.