For Bonds a and B Below Find the Values of X

question 63

Multiple Choice

For bonds A and B below find the values of X and Y assuming each is a zero coupon bond with a $1,000 face value (semiannual compounding) . $$\begin{array} { c c c c } \text { Bond } & \begin{array} { c } \text { Maturity } \\\text { (Years) }\end{array} & \begin{array} { c } \text { Yield } \\\text { (Percent) }\end{array} & \begin{array} { c } \text { Price } \\( \$ \$ ) \end{array} \\\hline \text { A } & X & 10 & 458.10 \\\text { B } & 9 & Y & 212.00\end{array}$$

• A)8 years and 4 percent
• B)10 years and 8 percent
• C)12 years and 10 percent
• D)14 years and 12 percent
• E)8 years and 18 percent

Recognize the efficiency comparison between the private and public sectors.

Identify factors contributing to government failures such as rent-seeking behavior and special-interest effects.

Understand the concept of logrolling and its impact on government decisions.

Recognize the implications of the principal-agent problem in politics.

---

Definitions:

Minimum ATC

The lowest point on the average total cost curve, representing the most efficient scale of production.

Purely Competitive Market

An idealized market structure characterized by a large number of small firms, identical products, and free entry and exit, leading to perfect competition.

Long-run Equilibrium

The state in which all factors of production and costs are variable, leading to a situation where no firm in the market wants to change its output level, assuming no external changes.

Producer Surplus

The difference between the actual price a producer receives (or producers receive) and the minimum acceptable price; the triangular area above the supply curve and below the market price.