Which of the Following Is True

question 11

Multiple Choice

Which of the following is true?

• A) When interest rates in the economy increase, all bond prices increase
• B) As its coupon increases, a bond's price decreases
• C) Longer maturity bonds are always worth more that shorter maturity bonds when the coupon rates are the same
• D) None of the above

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Definitions:

Reserve Requirements

Reserve requirements are central bank regulations that set the minimum amount of reserves that commercial banks must hold, either in their vaults or deposited with the central bank, as a percentage of their deposit liabilities.

Central Bank

An institution that manages a state's currency, money supply, and interest rates.

Federal Reserve

The central banking system of the United States, responsible for monetary policy, regulation of financial institutions, and maintenance of financial stability.

Check Clearing

The process by which money is transferred from the checking accounts of the writers of checks to the checking accounts of the recipients of the checks.