Chapter 6, Problem 2Q

Summary Introduction

To identify: The interest rate, which fluctuates more: short-term interest rate or long-term interest rate.

Introduction:

Short-term interest rate:

The interest rate, which applies on the securities and which has the short maturity period of less than a year is known as the short-term interest rate.

Long-term Interest Rate:

The interest rate, which applies on the securities and which has the long maturity period of more than one year is known as the long-term interest rate.