Q. Which one of the following would be the impact on the interest rates on small savings schemes if government bond (G-sec) yields decline?

[A] Interest rates on small savings schemes increase

[B] Interest rates on small savings schemes remain constant

[C] Interest rates on small savings schemes decline

[D] Interest rates on small savings schemes become variable

Answer: C
Notes:

Explanation – Interest rates on small savings schemes are linked to the yields of government bonds (G-secs) based on a formula. When G-sec yields decline, the formula suggests a reduction in the interest rates of small savings schemes.

Source: The Hindu

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