Suppose the following rates are averages for banks in your area: inter
Suppose the following rates are averages for banks in your area: interest checking accounts pay 1%,
savings accounts pay 2%, and one-year certificates of deposit pay 3%. All accounts are federally
insured by the FDIC.
The difference in rates can be explained mainly by
A) maturity premiums. B) liquidity premiums.
C) inflation risk premiums. D) default risk premiums.
ANSWER
B
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