The Risk Structure of Interest Rates Says

question 60

Multiple Choice

The risk structure of interest rates says:

• A) the interest rates on a variety of bonds will move independently of each other.
• B) lower rated bonds will have higher yields.
• C) U.S. Treasury bond yields always change by more than other bonds.
• D) interest rates only compensate for risk during recessions.

---

Definitions:

Income

The money received by an individual or business for services provided, products sold, or investments.

Interest Rate

The cost of borrowing money or the return on investment, expressed as a percentage of the principal, over a specific time period.

Utility Function

A mathematical representation of how different bundles of goods or services provide varying levels of satisfaction or utility to a consumer.

Consumption

The action of using up a resource or goods in the process of fulfilling human needs or wants.