-In the Figure Above, Which Movement Could Be the Result

question 49

Multiple Choice

-In the figure above, which movement could be the result of an increase in the wages paid to oil workers?

• A)Point a to point c
• B)Point a to point b
• C)Point a to point e
• D)Point a to point d

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Definitions:

Convexity

A measure of the curvature in the relationship between bond prices and bond yields, indicating how the duration of a bond changes as the interest rate changes.

Zero-Coupon Bonds

Debt securities that are issued at a discount and redeemed at face value but do not pay interest during their lifetime.

Immunize

A strategy in finance to shield a portfolio from interest rate movements by aligning the duration of assets and liabilities, thus stabilizing its overall value.

Interest Rate Risk

The potential for investment losses caused by fluctuations in interest rates, affecting debt securities inversely with their prices.