Question

Some characteristics of the determinants of nominal interest rates are listed as follows. Identify the components (determinants) and the symbols associated with each characteristic:

3. Determinants of market interest rates A Aa Some characteristics of the determinants of nominal interest rates are listed as follows. Identify the components (determinants) and the symbols associated with each characteristic: Characteristic Component Symbol This is the rate for a short-term riskless security when inflation is expected to be zero. Over the past several years, Germany, Japan, and Switzerland have had lower interest rates than the United States due to lower values of this premium. This is the premium that reflects the risk associated with changes in interest rates for a long-term security This is the rate on a Treasury bill or a Treasury bond. This is the premium added to the equilibrium interest rate on a security that cannot be bought or sold quickly enough to prevent or minimize loss. It is based on the bond's rating; the higher the rating, the lower the premium added, thus lowering the interest rate. | |

Answer 1