#1
What is the primary function of interest rates in financial markets?
To regulate inflation
To facilitate borrowing and lending
To control government spending
To stabilize currency exchange rates
#2
Which of the following is an effect of an increase in interest rates?
Decrease in bond prices
Increase in stock prices
Decrease in mortgage rates
Decrease in savings account yields
#3
What is the relationship between bond prices and interest rates?
They have an inverse relationship
They have a positive relationship
They are unrelated
They move independently
#4
Which of the following is a characteristic of fixed-rate loans?
Interest rate fluctuates with market conditions
Monthly payments vary over time
Interest rate remains constant throughout the loan term
Requires collateral
#5
What is the term 'default risk' associated with in finance?
The risk of a bond issuer going bankrupt
The risk of an investment losing value due to market fluctuations
The risk of a bank failing
The risk of interest rates changing
#6
What is the term 'repricing risk' referring to in finance?
The risk of interest rates changing
The risk of inflation eroding purchasing power
The risk of a bond issuer defaulting
The risk of a company's stock price decreasing
#7
What does the term 'risk premium' refer to in finance?
The interest rate charged on high-risk loans
The additional return an investor expects for taking on risk
The fee charged by insurance companies
The interest rate offered on government bonds
#8
Which type of risk refers to the possibility that an investment's value will decrease due to changes in interest rates?
Credit risk
Market risk
Interest rate risk
Liquidity risk
#9
What is the federal funds rate?
The interest rate at which banks lend to each other overnight
The interest rate set by the Federal Reserve for consumer loans
The interest rate paid on U.S. Treasury bonds
The interest rate on mortgages
#10
Which of the following is NOT a factor that influences interest rates?
Economic growth
Inflation expectations
Currency exchange rates
Political stability
#11
What is the term for the risk associated with a borrower defaulting on a loan?
Market risk
Credit risk
Interest rate risk
Liquidity risk
#12
What is the term 'nominal interest rate' in finance?
The interest rate adjusted for inflation
The interest rate before adjusting for inflation
The interest rate charged by credit card companies
The interest rate offered by central banks
#13
What is the primary purpose of the Discount Rate set by the Federal Reserve?
To control inflation
To regulate consumer spending
To influence short-term interest rates
To stabilize currency exchange rates
#14
In finance, what is the term 'yield curve' used to describe?
A graphical representation of interest rate changes over time
The relationship between stock prices and company earnings
The correlation between bond yields and inflation rates
The relationship between bond yields and their maturity dates
#15
What is the term 'duration' used to measure in finance?
The length of time until a bond matures
The sensitivity of a bond's price to changes in interest rates
The time it takes to double an investment
The amount of time before an investment is sold
#16
Which of the following is a factor contributing to interest rate risk in bonds?
The bond's credit rating
The bond's coupon rate
The bond's face value
The bond's maturity date
#17
In finance, what does the term 'term structure of interest rates' refer to?
The relationship between the interest rate and the bond's maturity
The interest rate offered on short-term loans
The interest rate set by the Federal Reserve
The interest rate on variable-rate mortgages
#18
Which of the following factors affects the term structure of interest rates?
Economic growth
Inflation expectations
Monetary policy
All of the above