Jerry Has $50,000 in His Savings Account and the Average

question 164

Multiple Choice

Jerry has $50,000 in his savings account and the average new car price is $23,000.Does Jerry have a demand for a new car?

• A) Yes,since Jerry can afford a new car.
• B) Not necessarily.Jerry has the ability to buy a new car,but we don't know if he also has the willingness to buy a new car.
• C) Yes,since Jerry's savings is more than double the average new car price.
• D) none of the above

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Definitions:

Default Risk

The risk that a borrower will not make the contractual interest or principal payments on their debt obligations.

Corporate Bond

A debt security issued by a corporation to raise funding, promising to repay the principal along with interest at specified dates.

TIPS Bond

Treasury Inflation-Protected Securities, a type of U.S. government bond designed to help investors protect against inflation by adjusting the principal value based on changes in the consumer price index.

Coupon Rate

The percentage of a bond's face value that is annually paid as interest by the bond.