InterestRates - 18:16 Chapter6 Pp.182204 Q:2 P:2,3,4,5,7,8

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18:16 Chapter 6  Pp.182-204 Q: 2 P: 2,3,4,5,7,8 Interest Rates in the Economy Consumption vs. Savings Nominal vs. Real Risk Premia Yield Curves Definitions Product Opportunities –  The investment opportunities in productive (cash-generating)  assets. Time Preference for Consumption –  The preferences of consumers for current  consumption as opposed to savings for future consumption. Risk –  In a financial market context, the chance that an investment will provide a low or  negative return. Inflation –  The amount by which prices increase over time. Real Risk Free Rate of Interest, r* -  The rate of interest that would exist on default-free  U.S. Treasury securities if no inflation were expected. Nominal (Quoted) Risk Free Rate, r RF  –  The rate of interest on a security that is free of  all risk; r RF   is proxied by the T-bill rate or the T-bond rate. r
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InterestRates - 18:16 Chapter6 Pp.182204 Q:2 P:2,3,4,5,7,8

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