The principal and interest What is the true definition of Compound interest? Main part amount you are borrowing

1. Money is the medium of exchange. People use money to purchase goods and services; they can’t use bonds.

2. Bonds pay interest but money does not. This assumption is fairly realistic.

Which one is true according to the Liquidity preference theory:

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  In the liquidity preference theory, people choose how to split their wealth between the economy’s two assets: money and bonds.
  
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  Money demand is the amount of wealth that people choose to hold in the form of money.
  
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  When the interest rate rises, the opportunity cost of money rises. This leads people to hold less money and to place more of their wealth in bonds.
  

According to the Liquidity preference theory, Equilibrium interest rate is:

The equilibrium nominal interest rate is the rate where the supply and demand curves intersect
The term structure of interest rates is about:

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  The term structure is the relationship among interest rates on bonds of different maturities (terms).
  

Find the true relationship between interest rates on bonds and default risk.

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  Interest rates on bonds increase with the level of default risk.
  

How does increased interest rate influence people’ choice to split their wealth?

Find one false statement about Yield curve among possible options:

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  The yield curve summarizes the term structure at a point in time. The yield curve usually slopes upward, is steeper than usual when short-term interest rates are expected to rise, and is inverted when interest rates are expected to fall by a large amount.
  
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  Economists use the yield curve to forecast future interest rates.
  

Indicate the true example for the relationship between tax and interest rate:

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  Interest income from municipal bonds is not taxed, which reduces interest rates on these bonds.
  

Indicate the correct definition of Municipal bond:

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