If the Current Market Interest Rate Rises from 4% to 5

question 10

Multiple Choice

If the current market interest rate rises from 4% to 5%, the price of a ten-year maturity bond will

• A)fall more than the price of a two-year maturity bond
• B)fall less than the price of a two-year maturity bond
• C)rise more than the price of a two-year maturity bond
• D)rise less than the price of a two-year maturity bond
• E)not be affected, and neither will the price of a two-year maturity bond

---

Definitions:

Taxes on Imports

Financial duties applied to goods brought into one country from another, typically used to protect domestic industries and generate revenue.

Trade Deficit

An economic measure where a country's imports exceed its exports over a certain period, indicating an outflow of domestic currency to foreign markets.

Comparative Advantage

The basis of most international trade, when a country specializes in products that it can supply more efficiently or at a lower cost than it can produce other items.