Interest Rates

What is the term structure of interest rates?

• The relationship between interest rates and the maturity of debt securities

• The amount of interest charged on loans

• The variability of interest rates over time

• The average interest rate set by the central bank

How does risk perception influence interest rates in the Philippines?

• Higher risk leads to lower interest rates

• Higher risk leads to higher interest rates

• Risk perception does not affect interest rates

• Interest rates remain constant regardless of risk

Which of the following factors contributes to the risk premium in interest rates?

• Inflation expectations

• Economic stability

• Creditworthiness of borrowers

• All of the above

In the Philippine market, why might long-term bonds have a higher yield than short-term bonds?

• Long-term bonds are less popular among investors

• Investors require a liquidity premium for locking in their funds for a longer period

• Short-term bonds are riskier

• All of the above

What is a liquidity premium?

• A discount for selling bonds early

• The additional yield required by investors to compensate for the risk of not being able to sell an asset quickly

• The interest rate charged by banks for loans

• The premium paid by issuers of bonds

Which of the following best describes the yield curve?

• A graphical representation of interest rates across different maturities

• The rate of return on government securities

• The risk-free rate of return

• A measure of inflation over time

What impact does monetary policy have on interest rates in the Philippines?

• It has no impact

• monetary policy can influence inflation, liquidity, and risk perceptions, thereby affecting interest rates

• monetary policy only affects short-term interest rates

• monetary policy increases risk premium

In the context of risk and term structure, what does a steep yield curve indicate?

• Low inflation expectations

• A decrease in interest rates

• High risk premiums and expected economic growth

• No risk associated with long-term investments

How do global investments affect interest rates in the Philippines?

• They have no impact on interest rates

• They only affect short-term interest rates

• They always increase domestic interest rates

• Increased foreign investments can lead to lower interest rates due to higher capital availability

What is the risk premium?

• The additional return required by investors for holding a risky asset

• The fee paid to financial advisors

• The interest rate on safe government securities

• The discount on short-term loans