Question

Which statement describes the market interest rate?

a) It is the contractual interest rate used to determine the amount of cash interest paid by the borrower.

b) It is the rate stated on the bond certificate that determines the value at which bonds will sell.

c) It is listed in the bond indenture.

d) It is the rate investors demand for loaning funds.

Answer 1

The correct answer is letter "D": It is the rate investors demand for loaning funds.

Step-by-step explanation:

The market interest rate us the current interest offered on cash deposits which are determined by their supply and demand according to their duration, amount, and the type of security offered. The market interest rate is mostly used in bank deposits but it can also be implemented in some other type of assets such as corporate bonds.