1) In the 1950s the interest rate on three month Treasury bills fluctuated between 1 percent and 3.5 percent; in the 1980s it fluctuated between ________ percent and ________ percent.
A) 5; 15
B) 4; 11.5
C) 4; 18
D) 5; 10
2) Uncertainty about interest rate movements and returns is called ________.
A) market potential
B) interest rate irregularities
C) interest rate risk
D) financial creativity
6) Rising interest rate risk
A) increased the cost of financial innovation.
B) increased the demand for financial innovation.
C) reduced the cost of financial innovation.
D) reduced the demand for financial innovation.
7) Adjustable rate mortgages
A) protect households against higher mortgage payments when interest rates rise.
B) keep financial institutions” earnings high even when interest rates are falling.
C) benefit homeowners when interest rates are falling.
D) generally have higher initial interest rates than on conventional fixed rate mortgages.