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When the Interest Rate on a Bond Is Above the Equilibrium

question 104

Multiple Choice

When the interest rate on a bond is above the equilibrium interest rate,in the bond market there is excess ________ and the interest rate will ________.


Definitions:

Put Option

A financial contract giving the option holder the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time.

Fair Value Hedge

A hedge that protects against changes in the fair value of assets, liabilities, or firm commitments through the use of a derivative.

British Pounds

The currency of the United Kingdom, also known as GBP, which is one of the world's major currencies.

Foreign Exchange Gain

A profit resulting from changes in exchange rates affecting the value of investments or transactions in foreign currencies.

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