The Usual Response of the Banking System to New Government

question 9

Multiple Choice

The usual response of the banking system to new government regulations is

• A)evasion through whatever means are necessary.
• B)strict compliance.
• C)an attempt to circumvent the regulations through financial innovation.
• D)bankruptcy.

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Definitions:

Discount Rate

The interest rate used to discount future cash flows of a financial instrument to present value.

Savings Bond

Government-issued bonds that are designed for individual investors and offer a fixed interest rate over a fixed period of time.

Matures

Refers to the point in time when a financial instrument, like a bond or loan, reaches its due date and the principal amount must be repaid.

Compounded Monthly

Compounded monthly refers to the process of calculating interest where the interest earned each month is added to the principal, and the next month's interest is calculated on the new total.