Interest-rate risk is the riskiness of an asset's returns due to
A) interest-rate changes.
B) changes in the coupon rate.
C) default of the borrower.
D) changes in the asset's maturity.
A
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Recall the Application. Greece faced a major financial crisis in 2010 as its budgetary imbalance became quite severe. Since Greece is a member of the Euro-zone, it could no longer ________ as a potential solution to its financial problems
A) depreciate its currency B) raise taxes C) reduce wages and prices D) cut spending
To reduce inflation, the federal reserve could
a) expand money supply in order to raise interest rates, which increases investment b) expand money supply in order to lower interest rates, which increases investment c) contract money supply in order to lower interest rates, which increases investment d) contract money supply in order to raise interest rates, which decreases investment e) buy bonds and increase discount rate to encourage borrowing