Which Best Describes the Prime Rate of Interest

question 19

Multiple Choice

Which best describes the prime rate of interest?

• A)The lending rate banks charge their most creditworthy clients
• B)The yield on 91-day treasury bills
• C)The yield on 30-year government bonds
• D)The lending rate the Bank of Canada charges financial institutions.
• E)The base rate for all mortgages

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Definitions:

Sunk Costs

Costs that have already been incurred and cannot be recovered.

Marginal Analysis

The examination of the benefits and costs of an additional unit of consumption or production to make decisions on allocations of resources.

Risk Aversion

The behavior of preferring to avoid loss rather than making a gain, reflecting a preference for certainty over uncertainty.

Irrational Decision

A choice made that contradicts logical reasoning, often influenced by emotional factors or cognitive biases.