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.
The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. Copyright 2015 Emerald Connect, LLC.