The Term Structure of Interest Rates Is Affected by Which

question 60

Multiple Choice

The term structure of interest rates is affected by which of the following? I. interest rate risk premium
II) real rate of interest
III) default risk premium
IV) inflation premium

• A) I and II only
• B) II and III only
• C) I, III, and IV only
• D) I, II, and IV only
• E) I, II, III, and I

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Definitions:

Organization

Pertains to the structured arrangement of components or people within a system designed to achieve a set of objectives.

Self-Consistency Dissonance

The discomfort experienced when one’s actions are not consistent with one’s self-image or personal values.

Festinger

An American social psychologist best known for Cognitive Dissonance Theory, which explains the discomfort that arises from holding two conflicting beliefs simultaneously.

Cognitive Dissonance

The psychological discomfort experienced when holding two or more conflicting beliefs, values, or attitudes, leading to changes in belief or behavior to reduce the discomfort.