Consider a Supply and Demand Model of Bonds for Company

question 12

Multiple Choice

Consider a supply and demand model of bonds for company X.Which of the following would one expect to happen if the default risk increases for company X?

• A) The demand curve will shift to the right,causing the price of the bond to rise.
• B) The demand curve will shift to the left,causing the price of the bond to rise.
• C) The supply curve will shift to the right,causing the price of the bond to fall.
• D) The demand curve will shift to the left,causing the price of the bond to fall.
• E) The supply curve will shift to the left,causing the price of the bond to rise.

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Definitions:

Special

Distinguished by a unique or particular quality, different from the norm.

Trust Endorsement

An endorsement that is used when the instrument is being transferred to an agent or trustee for the benefit of either the endorser or a third party; gives the endorser the rights of a holder.

Agent

An individual authorized to act on behalf of another person or entity in business transactions or legal matters.

Special Endorsement

An endorser’s signature accompanying the name of the endorsee.