The Inflation Rate

question 96

Multiple Choice

The inflation rate

• A) explains how prices are reacting to economic policies
• B) indicates the level of prices charged by all firms in the economy
• C) measures the annual percent increase in the average level of prices
• D) measures how fast wages and incomes are rising
• E) determines the prices that firms will offer to customers

---

Definitions:

Interest Rate Risk

The risk that the value of an investment will decrease due to a change in interest rates.

High Coupon Bond

A bond that offers a relatively high interest rate (or coupon rate) compared to the current prevailing rates of other similar bonds.

Interest Rate Sensitivity

A measure of how much the price of an investment, particularly bonds, changes in response to changes in interest rates.

Low Coupon Bond

A bond that pays interest at a lower rate than the market rate, typically resulting in its selling at a discount to face value.