_____ rates apply to financial assets that mature a number of years in the future.

• A. Discount window
• B. Short-term interest
• C. Long-term interest
• D. Federal funds

Answer: (C)

Long-term interest rates apply to financial assets that mature many years in the future. Rates vary with the time to maturity, and lenders require higher returns to compensate for longer exposure to inflation and uncertainty. Bonds with 10-year or 30-year maturities, for example, are priced using these long-term rates. In contrast, short-term interest rates cover assets maturing within a year, the discount window is an emergency, short-term lending facility for banks, and the federal funds rate is the overnight rate for interbank borrowing. So for assets that will mature in years rather than days or months, the appropriate measure is long-term interest rates.