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According to the Taylor Principle,when the Inflation Rate Rises,the Nominal

question 116

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According to the Taylor Principle,when the inflation rate rises,the nominal interest rate should be ________ by ________ than the inflation rate increase.


Definitions:

10 ½% Bond

A bond that pays an annual interest rate of ten and a half percent of its face value.

Yield To Maturity

The total return anticipated on a bond if it is held until its maturity date.

8 ½% Bond

A bond that pays an annual interest rate of 8.5% on its face value.

Current Yield

The annual income (interest or dividends) divided by the current price of the security, typically used for bonds.

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