If Interest Rates Increase Because of a Previously Unanticipated Inflation

question 73

Multiple Choice

If interest rates increase because of a previously unanticipated inflation rate risk:

• A) long-lived debt instruments will decline more than short-lived debt instruments
• B) long-lived debt instruments will decline less than short-lived debt instruments
• C) neither set of debt instruments will decline
• D) all other things being equal, both should decline equally

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Definitions:

Journal

A detailed record where all financial transactions of a business are initially recorded before being transferred to accounts in the general ledger.

Ledger

A comprehensive collection of all accounts and their transactions used in the accounting system of a business.

Chart

In finance and accounting, often refers to graphical representations of data, such as financial charts for analysis.

Accounts

Records within financial accounting that are used to track financial transactions and positions in various categories, such as assets, liabilities, equity, revenue, and expenses.