The Long-Run Equilibrium Rate of Interest in the Capital Market

question 12

True/False

The long-run equilibrium rate of interest in the capital market can be described as either the one at which the stock of capital stops increasing or the one at which there is no net saving.

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Definitions:

Premium

The amount by which the price of a security or insurance policy exceeds its par or face value or the cost of acquiring an option or futures contract.

Strike Price

The predetermined price at which an option can be exercised, either to buy or sell the underlying asset.

Call Option

A financial contract giving the buyer the right, but not the obligation, to buy an underlying asset at a predetermined price within a specific timeframe.

Market Price

The current price at which an asset or service can be bought or sold in the open market.