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The precaution of short term interest rate is that the rate tends to be higher due to its term. Long term interest rate, on the other hand, tends to be lower, but since it will take a long time to pay off debt, in the long run, the accumulated interest rate becomes much more.
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How do interest rates affect investment?
When interest rates are high, investors will consider investing in short term investments, instead of long term investments. When interest rates are low, investors will consider investing in bonds because they are safer.
Why do long term loans have higher interest rates than short term loans?
feel it.
In periods of tight money long term rates are often higher than short-term rates?
It is true that in some cases during periods of tight money long term rates can be higher then short-term rates. Less interest can be gotten when there is when there is income coming in.
Short-term interest rates show the cost of borrowing money for how long?
for a few days or months
Are long term bond prices more sensitive to changes in interest rates than are short term bond prices?
yes
Discuss the relative volatility of short- and long-term interest rates?
short- and long-term interest rates usually move in the same direction. Yield curve is often upward, so, long-term interest rates are usually higher than short-term interest rates. short-term interest rates are often more fluctuating than long-term rates.
Are interest rates on long term bonds usually lower or higher than interest rates on short term bonds?
Higher
A normal term structure of interest rates would depict?
long-term rates higher than short-term
How do interest rates affect investment?
When interest rates are high, investors will consider investing in short term investments, instead of long term investments. When interest rates are low, investors will consider investing in bonds because they are safer.
Why do long term loans have higher interest rates than short term loans?
feel it.
In periods of tight money long term rates are often higher than short-term rates?
It is true that in some cases during periods of tight money long term rates can be higher then short-term rates. Less interest can be gotten when there is when there is income coming in.
Short-term interest rates show the cost of borrowing money for how long?
for a few days or months
What does the term structure of interest rates indicate?
The term structure of interest rates is often referred to as a yield curve. It shows the relative level of short-term and long-term interest rates at a point in time. Knowledge of changing interest rates and interest rate theory is extremely valuable to corporate executives making decisions about how to time and structure their borrowing between short- and long-term debts. the yield curve indicates the movements of interest rates. For example, a downward curve indicates that the interest rate will fall in the future. these signals help firms to manage their debt structure.
The theory of the term structure of interest rates which suggests that long-term rates are determined by the average of short-term rates expected over the time that a long-term bond is outstanding is?
expectations hypothesis
If there is a decline in interest rates which would you rather be holding long term bonds or short term bonds?
God
Are long term bond prices more sensitive to changes in interest rates than are short term bond prices?
yes
Can you short sell a bond?
Yes, you can short a bond. How you do it and not get burned is to look for long periods of rising interest rates--the higher the interest rate gets, the cheaper the bond gets. If you were going to get into shorting bonds, you'd almost have to specialize in it.
