Like this study set? Create a free account to save it.

Sign up for an account

Already have a Quizlet account? .

Create an account

Determining Interest Rates

Expected return

The return on an asset during a future period; also known as expected rate of return


The degree of uncertainty in the return on an asset


Dividing wealth among many different assets to reduce risk

Market (or systematic) risk

Risk that is common to all assets of a certain type, such as the increases and decreases in stocks resulting from the business cycle

Idiosyncratic (or unsystematic) risk

Risk that pertains to a particular asset rather than to the market as a whole, tas when the price of a particular firm's stock fluctuates because of the success or failure of a new product

Fisher effect

The assertation by Irving Fisher that the nominal interest rises or falls point-for-point with changes in the expected inflation rate

Closed economy

An economy in which households, firms, and governments do not borrow or lend internationally

Open economy

An economy in which households, firms, and governments borrow and lend internationally

Small open economy

An economy in which total saving is too small to affect the world real interest rate

Large open economy

An economy in which shifts in domestic saving and investment are large enough to affect the world real interest rate

Please allow access to your computer’s microphone to use Voice Recording.

Having trouble? Click here for help.

We can’t access your microphone!

Click the icon above to update your browser permissions and try again


Reload the page to try again!


Press Cmd-0 to reset your zoom

Press Ctrl-0 to reset your zoom

It looks like your browser might be zoomed in or out. Your browser needs to be zoomed to a normal size to record audio.

Please upgrade Flash or install Chrome
to use Voice Recording.

For more help, see our troubleshooting page.

Your microphone is muted

For help fixing this issue, see this FAQ.

Star this term

You can study starred terms together

Voice Recording