Interested in Interest Rates
Published: April 01, 2015
After dropping to historic lows during the recession, interest rates are expected to rise in 2015. Try this short quiz to test your interest-rate knowledge.
1. Which of the following interest rates is directly controlled by the Federal Reserve Open Market Committee.
A) Prime rate
B) Federal funds rate
C) Mortgage rates
D) All of the above
E) None of the above
2. The Federal Reserve typically ______ interest rates to control inflation and ______ rates to help accelerate economic growth.
A) raises / lowers
B) lowers / raises
3. The stock market tends to applaud higher interest rates.
A) True
B) False
4. When interest rates rise, the value of _____ bonds generally decreases.
A) municipal
B) Treasury
C) corporate
D) existing
E) new
5. The longer a bond’s maturity date, the _____ sensitive its value is to fluctuations in interest rates.
A) more
B) less
The principal value of bonds may fluctuate with market conditions. Bonds redeemed prior to maturity may be worth more or less than their original cost. Investments seeking to achieve higher yields also involve a higher degree of risk.