The Real Rate of Interest Is

question 75

Multiple Choice

The real rate of interest is

• A)the nominal rate of interest minus the anticipated rate of inflation.
• B)the current rate actually paid by the borrower.
• C)the difference between the bank's lending and savings rates.
• D)the current rate which the government pays on its debt.

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Definitions:

Collateralized Debt Obligations

Collateralized debt obligations (CDOs) are complex financial instruments that pool together cash flow-generating assets and repackages this asset pool into discrete tranches that can be sold to investors.

Default Risk

The potential that a borrower will fail to meet the obligations of a loan or debt agreement.

Mortgages

Loans specifically designed for the purchase of real estate, secured by the property itself.

Sarbanes-Oxley Act

A U.S. federal law enacted in 2002 to protect investors from the possibility of fraudulent accounting activities by corporations.