Use the Duration Model to Approximate the Change in the Market

question 22

Multiple Choice

Use the duration model to approximate the change in the market value (per $100 face value) of two-year loans if interest rates increase by 100 basis points.

• A)-$1.756
• B)-$1.775
• C)+$98.24
• D)-$1.000
• E)+$1.924 [Refer to: 9-95]

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Definitions:

Price Fixing

A practice where businesses agree on the selling price of their products or services, typically to prevent competition and increase profits, which is often illegal.

Geographical Pricing

A pricing strategy where the price of a product varies depending on the geographical location or market.

Predatory Pricing

A competitive strategy in which a business sets extremely low prices to eliminate competition and monopolize the market.

Bait and Switch

A deceptive marketing strategy where a customer is lured by the advertisement of a low-priced item but then is encouraged to buy a more expensive one.