One of the Basic Relationships in Interest Rate Theory Is

question 64

Multiple Choice

One of the basic relationships in interest rate theory is that, other things held constant, for a given change in the required rate of return, the the time to maturity, the the change in price.

• A) longer; smaller.
• B) shorter; larger.
• C) longer; greater.
• D) shorter; smaller.
• E) Answers c and d are correct.

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Definitions:

Confirmation Bias

The tendency to search for, interpret, favor, and recall information in a way that confirms one's preexisting beliefs or hypotheses.

Hindsight Bias

The tendency to believe, after an event has occurred, that one would have predicted or expected the outcome, often oversimplifying the causes and effects.

Morality

Principles concerning the distinction between right and wrong or good and bad behavior.

Anchoring Heuristic

A cognitive bias that describes the common human tendency to rely too heavily on the first piece of information offered when making decisions.