In an Efficient Market the Price of a Bond

question 39

Multiple Choice

In an efficient market the price of a bond

• A)is generally greater than the present value of future interest and principal payments.
• B)is generally less than the present value of future interest and principal payments.
• C)equals the present value of future interest and principal payments.
• D)will be less than, greater than, or equal to the present value of future interest and principal payments, depending upon prevailing interest rates.

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Definitions:

Error of Central Tendency

A bias in evaluation or assessment where all individuals are rated near the average or middle of the scale, ignoring variation in performance.

Performance-rating Error

Mistakes or biases that occur when evaluating an employee's performance, potentially leading to inaccurate assessments.

Trait Evaluation Approaches

Methods used in psychology and human resource management to assess individuals' characteristics and predict their behavior or performance.

Inherent Subjectivity

The natural presence of personal opinions and biases in judgement and decision-making processes.