Which statement about interest rates is true?

Question

Quizplus · Accepted Answer

The prime rate, which is the interest rate that banks charge their best customers, is typically equal to the overnight rate (the rate at which banks lend to each other overnight) plus a certain percentage. This percentage can vary, but is often around 2 percent. Therefore, statement A is true. The other statements are false or misleading. Long-run interest rates are typically higher than short-run interest rates, not lower (so statement B is false). Short-run bonds are generally considered less risky than long-run bonds (so statement C is false). Investors typically require a higher reward for holding less liquid assets, not more liquid ones (so statement D is false). And finally, long-run interest rates tend to fluctuate less than short-run interest rates, not more (so statement E is false).

Which Statement About Interest Rates Is True