A Lower Interest Rate (Discount Rate) Would

question 15

Multiple Choice

A lower interest rate (discount rate) would

• A) reduce the price of corporate bonds.
• B) reduce the price of preferred stock.
• C) reduce the price of common stock.
• D) none of the other answers are correct

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Definitions:

Taxes

Compulsory financial charges or some other type of levy imposed upon a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenses.

Federal Funds Rate

The interest rate charged in the federal funds market; the interest rate banks charge one another for overnight borrowing; the Fed’s target interest rate.

Fiscal Policy

Involves government policies on taxation and spending that aim to influence a country's economic conditions, such as controlling inflation, unemployment, and promoting economic growth.

Transfer Payments

Payments made by the government to individuals through various social benefit programs, without the government receiving any goods or services in return.