Which of the following statements is TRUE?
A)The interest rates that banks offer on investments or charge on loans is independent of the time horizon of the investment or loan.
B)The Bank of Canada determines very short-term interest rates through its influence on the federal funds rate.
C)The interest rates that are quoted by banks and other financial institutions are real interest rates.
D)Fundamentally,interest rates are determined by the Bank of Canada.
E)If interest rates are expected to fall in the future,long-term rates will tend to be higher than short-term rates.

Question

Quizplus · Accepted Answer

The Bank of Canada determines the target overnight interest rate, which in turn affects the federal funds rate, a very short-term interest rate. The other statements are false. The interest rates offered by banks on loans and investments are often dependent on the time horizon, the interest rates quoted by financial institutions are nominal, and long-term rates tend to be lower than short-term rates when interest rates are expected to fall in the future.

Which of the Following Statements Is TRUE