If the Reserve Bank of Australia Wants to Increase Interest

question 122

Multiple Choice

If the Reserve Bank of Australia wants to increase interest rates, it will:

• A)buy financial securities.
• B)sell financial securities.
• C)increase the exchange rate.
• D)decrease the exchange rate.

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Definitions:

Beta

A measure of a stock's volatility in relation to the overall market; a beta above 1 indicates higher than market volatility.

Market Risk Premium

The extra return over the risk-free rate that investors require to compensate them for the risk of investing in the stock market.

Risk-free Rate

The return on an investment with no risk of financial loss, often associated with government bonds.

Required Return

The minimum expected yield by investors for providing capital to a company or project.