Question

1.

An interest rate that is low for only a short period of time is called:

	a teaser rate.
	a balance transfer fee.
	a balloon payment.
	an annual percentage rate.

2.

Which of these is NOT a way financial institutions reduce risk?

	collecting information helpful for risk assessment
	diversifying funds
	performing credit checks on borrowers
	guaranteeing a high rate of return for all lenders

3.

Traditional Individual Retirement Accounts (IRAs) are taxed:

	when you make contributions and again when you make withdrawals.
	Traditional IRAs are never taxed.
	only when you make withdrawals.
	only when you make contributions.

4.

Which of these is a basic goal of the Federal Reserve System?

	a balanced federal budget
	export promotion
	full employment
	zero interest rates

5.

The discount rate is:

	the interest rate banks charge one another when they lend or borrow reserves.
	the Fed's most effective monetary policy tool.
	the rate regional Federal Reserve banks charge depository institutions to borrow reserves.
	now set below the federal funds rate.

Answer 1

1. An interest rate that is low for only a short period of time is called:

An annual percentage rate

2. Which of these is NOT a way financial institutions reduce risk?

guaranteeing a high rate of return for all lenders.

3. Traditional Individual Retirement Accounts (IRAs) are taxed:

only when you make withdrawals

4. Which of these is a basic goal of the Federal Reserve System?

A balanced federal budget

5. The discount rate is:

the Fed's most effective monetary policy tool.