A Rise in Short-Term Interest Rates That Is Believed to Be

question 18

Multiple Choice

A rise in short-term interest rates that is believed to be only temporary

• A)is likely to have a significant effect on long-term interest rates.
• B)will have a bigger impact on long-term interest rates than if the rise in short-term rates had been permanent.
• C)is likely to have only a small impact on long-term interest rates.
• D)cannot possibly affect long-term interest rates.

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Definitions:

Financial Institutions

Entities that provide financial services, including banks, insurance companies, pension funds, brokerage firms, and others.

Realized Rate

The actual return earned on an investment over a given time period.

Investment Horizon

Investment horizon refers to the total length of time an investor expects to hold an investment or portfolio before liquidating it.

Promised Yield

The return a bond issuer commits to pay to bondholders, usually expressed as an annual percentage.