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Most Theories in Economics Are Based on How One Variable

question 36

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Most theories in economics are based on how one variable affects another variable.


Definitions:

Yield To Maturity

The total return anticipated on a bond if the bond is held until it matures, considering all payments of principal and interest.

Duration

A measure of the sensitivity of a bond's price to changes in interest rates, representing the weighted average of the time until a bond's cash flows are received.

Basis Points

A unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument, where one basis point is equal to 1/100th of 1%.

Modified Duration

A measure of the sensitivity of a bond's price to changes in interest rates, adjusted to account for changes in yield.

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