Elasticity Measures

question 31

Multiple Choice

Elasticity measures:

• A) the slope of a demand curve.
• B) the inverse of the slope of a demand curve.
• C) the percentage change in one variable in response to a one percent increase in another variable.
• D) sensitivity of price to a change in quantity.

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Definitions:

Compounded Semi-Annually

Interest calculation method where the interest is added to the principal sum twice a year, causing the interest to earn interest.

Strip Bond

A type of bond where the principal and regular coupon payments have been separated and are sold individually as zero-coupon bonds.

Interest

The cost of borrowing money, typically expressed as a percentage of the borrowed amount, paid by the borrower to the lender.

Effective Rate

The actual interest rate of an investment or loan when the compounding frequency is accounted for, giving a true reflection of the cost or yield.