It Is Expected That the Interest Rates on Debentures Will

question 80

Multiple Choice

It is expected that the interest rates on debentures will be greater than on commercial bills because:

• A)a bank may not endorse commercial bills.
• B)of the liquidity preference of investors.
• C)debentures are typically unsecured.
• D)debentures are readily marketable.

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Definitions:

Discount Rate

The interest rate charged to commercial banks and other depository institutions for loans received from the Federal Reserve's discount window.

Duration

Duration measures a bond's sensitivity to changes in interest rates, representing the weighted average time to receive the bond's cash flows.

Payments

Transactions or transfers of money from one person or entity to another.

Duration

A metric indicating how the price of a bond or another type of debt instrument reacts to interest rate fluctuations, usually denoted in years.