Other Things Being Equal, Bond Prices

question 76

Multiple Choice

Other things being equal, bond prices

• A)vary directly with interest rates.
• B)vary proportionally with interest rates.
• C)are unaffected by interest- rate changes.
• D)vary inversely with interest rates.
• E)are unaffected by changes in the demand for money.

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Definitions:

Required Rate

The minimum return an investor expects to achieve on an investment, considering its risk level and the opportunity cost of forgoing other investments.

Marginal Cost

Marginal cost refers to the increase or decrease in the total cost of producing one more unit of a good or service.

After-Tax Cost

The actual cost of an investment or loan after accounting for taxation, representing the net expense to the investor or borrower.

Capital Budgeting

The process by which a business evaluates and selects long-term investments that are expected to generate profit or value over time.