Which of the Following Is True

question 70

Multiple Choice

Which of the following is true?

• A)None of these
• B)Commercial banks are the only legal type of financial intermediary.
• C)Banks are prohibited by law from earning a profit.
• D)It is customary to pay a higher interest rate on a loan than you would receive on your savings account from the same bank.
• E)A bank earns a profit by lending at a lower rate than it pays its depositors.

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Definitions:

Yield To Maturity

The complete return expected from holding a bond until it reaches its maturity.

Market Price

The price for an asset or service in the market at the present time.

Interest Rate Risk

The risk that changes in interest rates will negatively affect the value of an investment, especially those with fixed interest rates.

Coupon

The interest rate stated on a bond when it's issued, which represents the annual interest payment made to bondholders.