If the Payment Stream of a Bond Remains the Same

question 125

Multiple Choice

If the payment stream of a bond remains the same and the price of the bond goes down, the:

• A) effective yield is unchanged.
• B) effective yield rises.
• C) effective yield decreases.
• D) bond is reissued to reflect the higher interest rate.
• E) bond is reissued to reflect the lower interest rate.

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Definitions:

Special Revenue Fund

A fund used by a government to account for revenue from specific sources that are legally restricted to expenditure for particular purposes.

Capital Projects Fund

A type of governmental accounting fund used to finance and track the costs of major capital improvements and constructions.

Permanent Fund

A fund established to provide a stable source of revenue for specific purposes, often funded by endowments or resources that generate interest or other income.

Agency Fund

An agency fund is a fiduciary account held by a governmental unit that contains resources received and held as an agent for others, to be expended or invested according to the principal's direction.