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Risk-free interest rate: Quiz


Question 1: The risk-free interest rate is thus of significant importance to ________ in general, and is an important assumption for rational pricing.
Modern portfolio theoryEfficient-market hypothesisCapital asset pricing modelBeta (finance)

Question 2: Of course, many countries have other measures and institutions (such as theoretically independent ________) to reduce the likelihood of such an occurrence.
Bank for International SettlementsFederal Reserve SystemCentral bankOpen market operations

Question 3: For a ________, the government retains the theoretical capacity to print as much of that currency as will be required to pay its own debts (in that currency).
MoneyFederal Reserve SystemFiat moneyUnited States dollar

Question 4: Note that this does not apply to currencies such as the ________ where no individual government has the authority to print currency.
EuroEurozoneEuropean Central BankPound sterling

Question 5: A German investor living circa 1904 trying to decide whether to purchase long-term bonds issued by the German government could scarcely have been able to anticipate a World War followed by ________.
Denomination (currency)United States dollarHyperinflationDeutsche Mark

Question 6: It is also a required input in financial calculations, such as the ________ formula for pricing stock options and the Sharpe Ratio.
Futures contractGreeks (finance)Option (finance)BlackÔÇôScholes

Question 7: The risk-free interest rate is the interest rate that it is assumed can be obtained by investing in financial instruments with no ________.
Interest rate riskCredit default swapLiquidity riskCredit risk

Question 8: market risk (the risk of changes in market interest rates), ________ (the risk of being unable to sell the instrument for cash at short notice without significant costs), etc.
Financial riskCredit riskFinanceLiquidity risk


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