Question

What is the typical relationship between time and interest rate?

A. Shorter time period usually equals higher interest rates.
B. Shorter time periods usually have no affect on interest rates.
C. Longer time periods usually have no affect on interest rates.
D. Longer time period usually equals higher interest rates.

Answer 1

B. Shorter time periods usually have no affect on interest rates.

Step-by-step explanation:

The interest rate is correllate to the potential risk of the investment.

As in a long period, there’re more unpredetermined risks, and we normally say “high risk high return). Thus a longer time period ussually have higher interest rate and vice versa.

In shorter period, we may dertermine the risk more easily then it deserves to enjoy lower interest risk.