Other Things Being Equal, a Rise in the Price Level

question 141

Multiple Choice

Other things being equal, a rise in the price level will imply in wealth for the bondholder and
In the wealth of the issuer of the bond.

• A) a decline; an increase
• B) a decline; a decline
• C) a decline; no change
• D) an increase; a decline
• E) an increase; an increase

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Definitions:

Straight-Line Method

A method of calculating depreciation and amortization that evenly distributes the cost of an asset over its useful life.

Market Rate

Market Rate is the prevailing interest rate available in the marketplace on loans, savings, or investments.

Coupon Rate

The annual interest rate paid by a bond's issuer to the bond's holders, usually expressed as a percentage of the bond's face value.

Interest Expense

The cost incurred by an entity for borrowed funds, which may pertain to bonds, loans, lines of credit, or other forms of debt financing.