What Would Be the Effect on U

question 351

Multiple Choice

What would be the effect on U.S.interest rates if the Chinese and Japanese governments sold all their U.S.government securities?

• A)Interest rates would rise.
• B)Interest rates would fall.
• C)The selling of Chinese and Japanese U.S.government securities would have very little effect on U.S.interest rates.

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Definitions:

Break-Even Rate

The interest rate at which the present value of a project's or investment's costs equals the present value of its benefits, there is no net loss or gain.

Annuity A

Represents a financial product that promises to pay the holder a fixed stream of payments over a specified period of time.

APR

Annual Percentage Rate, a measure used to calculate the cost of borrowing, including interest and other fees, shown as a yearly rate.

EAR

Ear is the acronym for Effective Annual Rate, which measures the real return on an investment or the real interest rate on a loan, accounting for compounding over a specified period.