Matching: Match the Term with the Definition Real interest rate A theory used to
ID: 2740754 • Letter: M
Question
Matching: Match the Term with the Definition
Real interest rate A theory used to explain the term structure of interest rates which states that every borrower and every lender has a preferred maturity and that the slope of the yield curve depends on the supply of and demand for funds in the short- and long-term markets. Capital gain The graphical representation of the relationship between the interest rate and the time to maturity of the debt for a specified borrower in a given currency and on a given date. Default risk The chance that the return earned by a financial asset will increase or decrease due to a change in the value of an opportunity cost (market) interest rate. Term structure of interest rates An asset exhibiting less of this attribute can only be sold by: (1) waiting a long time, (2) discounting the price, and/or (3) incurring significant transaction costs. Interest rate risk This theory of interest rates argues that the slope of the yield curve reflects the future inflationary expectations of investors, all else being equal. Liquidity The percentage return generated by an investment, calculated as the cash flows received from the investment (for example, interest or dividend income and capital gains) divided by the purchase price of the investment. Market segmentation theory The variability in potential investment returns that results from the possibility that the investment's issuer will not meet either its interest or principal-repayment obligations or the other terms specified in the investment agreement. Yield curve An implied interest rate that does not reflect an inflation risk premium. Expectations theory The mathematical relationship between the yields and the times to maturity on the debt securities of the same issuer as specified on the same date and denominated in the same currency. Yield Calculated as the difference between a higher selling price and a lower purchase price, this profit results from the appreciation in an asset's value.Explanation / Answer
Answer H J G F I D A E B C