Which Statement About Interest Rates Is True

question 127

Multiple Choice

Which statement about interest rates is true?

• A) The prime rate equals the overnight rate plus 3 percent.
• B) Long-run interest rates tend to be lower than short-run interest rates.
• C) Long-run bonds tend to be riskier than short-run bonds.
• D) Investors require a higher reward for bonds with more liquidity.
• E) Long-run interest rates fluctuate more than short-run interest rates.

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Definitions:

Primacy Effect

The tendency to remember information at the beginning of a list better than information that comes later.

Bottom-up Approach

A strategy or method that begins with specific details or elements and builds up to a more general, comprehensive system or understanding.

Top-down Approach

A problem-solving strategy that starts with the big picture before breaking it down into smaller, more manageable parts.

Schema-inconsistent

Pertains to information or events that do not fit within existing cognitive frameworks or expectations.