The Relationship Between a Bond's Price and the Yield to Maturity

question 43

Multiple Choice

The relationship between a bond's price and the yield to maturity

• A)changes at a constant level for each percentage change of yield to maturity.
• B)is an inverse relationship.
• C)is a linear relationship.
• D)changes at a constant level for each percentage change of yield to maturity and is an inverse relationship.

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Definitions:

Diminishing Returns

The decrease in the marginal (incremental) output of a production process as the amount of a single factor of production is incrementally increased, while other factors are kept constant.

Average Cost

The total cost of production divided by the number of goods produced.

Marginal Cost

Marginal cost is the change in total cost that arises when the quantity produced is incremented by one unit; it is the cost of producing one more unit of a good.

Marginal Productivity

The additional output that can be produced by adding one more unit of a specific input, holding all other inputs constant.