Consider a Bond That Pays $1000 in One Year

question 4

Multiple Choice

Consider a bond that pays $1000 in one year.Suppose that the market interest rate for savings is 8%,but the interest rate for borrowing is 10%.The price range that this bond must trade in a normal market if no arbitrage opportunities exist is closest to:

• A)$909 to $917.
• B)$909 to $926.
• C)$917 to $926.
• D)$909 to $1000.

Recognize the impact of supply and demand changes on market outcomes.

Apply knowledge of elasticity to real-world scenarios such as agricultural production, tuition fees, and pricing strategies.

Interpret graphical representations of demand and understand how they relate to total revenue.

Identify situations where demand is likely to be elastic or inelastic based on the nature of the product or service.

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