Pricing Constraints Are

question 101

Multiple Choice

Pricing constraints are

• A) barriers that must be overcome in order to set pricing objectives.
• B) competitive pricing advantages one firm has over another.
• C) different pricing strategies for each of the firm's products.
• D) factors that limit the range of prices a firm may set.
• E) barriers to entry a firm faces when launching a new product.

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Definitions:

Coupon Rate

The percentage rate at which a bond's face value accrues interest each year.

Straight Debt

A fixed-income security, such as a bond, that has a predetermined interest rate, maturity, and principal repayment schedule.

Credit Default Swap

A specific type of credit derivative where the underlying reference asset is a credit obligation such as a bond or a bank loan of a specific company. One counterparty (the protection buyer) makes a periodic payment (the credit default swap premium) to the second counterparty (the protection seller). If the underlying reference asset suffers a credit event such as bankruptcy, the protection seller will make a payment to the protection buyer. Credit default swaps allow protection buyers to hedge themselves against credit risk, and protection sellers to invest based on their assessment of credit risk.

Premium Rate

This refers to the additional cost above the standard rate charged by financial instruments or insurance policies, to cover additional risks or benefits.