(A) The interest rate of a two-year Negotiable Certificate of Deposit (NCD) of a US bank is usually higher than that of the three-month US Government Treasury Bills. Use the concept of risk premium, term premium and liquidity premium to explain this.

(B) Explain how the development of ATM machines, automatic electronic payment internet banking affect the money multiplier. m=(k+1)/(r+k+e)

Answer rating: 100% (QA)

A The higher interest rate on a twoyear Negotiable Certificate of Deposit NCD compared to a threemonth US Government Treasury Bill can be explained by the concept of risk premium term premium and liqu... View the full answer