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Is the net reaction favorable for the following series of coupled reactions?
Fixed Assets
Long-term tangible assets that are used in the operations of a business and are not expected to be consumed or converted into cash within a year.
Default Risk
The risk that a borrower will not pay the interest and/or principal on a loan as it becomes due. If the issuer defaults, investors receive less than the promised return on the bond. Default risk is influenced by both the financial strength of the issuer and the terms of the bond contract, especially whether collateral has been pledged.
Interest Rate Risk
Arises from the fact that bond prices decline when interest rates rise. Under these circumstances, selling a bond prior to maturity will result in a capital loss; the longer the term to maturity, the larger the loss.
Real Return Bonds
Bonds issued by the federal government that offer inflation protection to investors.
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