Increased Liquidity in Recent Decades Has Reduced Interest Rates on Which

question 28

Multiple Choice

Increased liquidity in recent decades has reduced interest rates on which of the following assets (holding constant all other things that affect interest rates) ?

• A) U.S. government bonds
• B) bonds issued by large corporations
• C) business loans
• D) bonds issued by state governments

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Definitions:

Market Rate

The prevailing interest rate available in the marketplace for instruments of similar risk and maturity.

Down Payment

An initial payment made when something is bought on credit.

Successful-efforts Method

An accounting method used in the oil and gas industry where costs are capitalized only if successful discoveries are made.

Full-cost Method

Accounting practice where all direct and indirect fixed and variable costs are allocated to inventory until the products are sold.