1. Which of the following would be most likely to result in a decrease in nominal interest rates?

- A recession

- A recovery in the housing market coupled with a decrease in the unemployment rate.

- Lenders become more "risk averse."

-Lenders expect a sharp economic expansion in the near future.

2.

Which of the following would not be beneficial to real asset holders?

-An increase in stock and real estate prices, causing households to feel richer and spend more.

- A higher rate of inflation

-Rapid economic growth in countries around the world

-A bursting of the housing bubble.

3. In our nominal interest rate stack, the risk free rate is missing which of the following blocks?

- Cost of inflation

- Cost of operations

-Cost of default

-Cost of inventory

4. Refer to question 3. Which of the following blocks accounts for the fact that interest rates change over time?

- Cost of inflation

- Cost of operations

-Cost of default

-Cost of inventory