If the Nominal Interest Rate Is Rises

question 24

Multiple Choice

If the nominal interest rate is rises,

• A) there is substantial inflation in the economy.
• B) real interest rates are declining.
• C) the opportunity cost of holding cash rises..
• D) consumers and firms are less inclined to use credit cards.
• E) inflation is declining.

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Definitions:

Par Value

The nominal or face value of a bond, share of stock, or coupon as indicated on a bond or stock certificate. It is a static value determined at the time of issuance.

Face Value

The nominal value stated on a financial instrument, such as a bond or stock certificate.

Present Value

The current economic value of a future financial sum or sequence of inflows, determined by a particular rate of return.

Coupon Rate

The interest rate stated on a bond when issued, which represents the annual interest payment made to bondholders.