If the Interest Rate Decreases

question 15

Multiple Choice

If the interest rate decreases

• A)or if the price level increases,then people will want to hold more money.
• B)or if the price level increases,then people will want to hold less money.
• C)or if the price level decreases,then people will want to hold more money.
• D)or if the price level decreases,then people will want to hold less money.

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Definitions:

Basis Risk

The risk that the price of a hedge and the asset being hedged will not move in perfect correlation.

Call Option

A financial arrangement granting the buyer the freedom, but not the duty, to acquire an asset such as a stock, bond, commodity, at a set price within an established timeframe.

Credit Default Swap

A financial derivative that allows an investor to swap or offset credit risk with another party.