1. Which of the following would be most likely to result in a decrease in nominal interest rates?
- A recession
- A recovery in the housing market coupled with a decrease in the unemployment rate.
- Lenders become more "risk averse."
-Lenders expect a sharp economic expansion in the near future.
2. Which of the following would not be beneficial to real asset holders?
-An increase in stock and real estate prices, causing households to feel richer and spend more.
- A higher rate of inflation
-Rapid economic growth in countries around the world
-A bursting of the housing bubble.
3. In our nominal interest rate stack, the risk free rate is missing which of the following blocks?
- Cost of inflation
- Cost of operations
-Cost of default
-Cost of inventory
4. Refer to question 3. Which of the following blocks accounts for the fact that interest rates change over time?
- Cost of inflation
- Cost of operations
-Cost of default
-Cost of inventory