Which of the Following Is an Effective Strategy in Times

question 75

Multiple Choice

Which of the following is an effective strategy in times of falling interest rates?

• A)Use long-term loans to take advantage of current low rates.
• B)Use short-term loans to take advantage of lower rates when you refinance the loans.
• C)Select short-term savings instruments to take advantage of higher rates when they mature.
• D)Select short-term savings instruments to lock-in earnings at current high rates.
• E)Select long-term savings instruments to lock-in earnings at current low rates.

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Definitions:

360-Day Year

A simplified accounting method where each month is considered to have 30 days, resulting in a year total of 360 days, used in financial calculations.

Loan Period

The duration over which a borrower agrees to pay back a loan to the lender, typically expressed in months or years.

Ordinary Simple Interest

Interest calculated on the principal amount only, without compounding, usually over a period of a year or less.

360-Day Year

A financial convention or calculation basis where the year is assumed to consist of 360 days rather than 365 or 366 days, often used in interest rate calculations.