Assume That All Interest Rates in the Economy Decline from 10

question 78

Multiple Choice

Assume that all interest rates in the economy decline from 10% to 9%.Which of the following bonds would have the largest percentage increase in price?

• A) An 8-year bond with a 9% coupon.
• B) A 1-year bond with a 15% coupon.
• C) A 3-year bond with a 10% coupon.
• D) A 10-year zero coupon bond.
• E) A 10-year bond with a 10% coupon.

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Definitions:

Attribution Theory

A psychological framework for understanding how individuals infer the causes of others' behavior, whether attributing it to internal dispositions or to external situations.

Fundamental Attribution Error

The tendency to overemphasize personality-based explanations for behaviors observed in others while underemphasizing the role of situational factors.

Behavioral Perspective

An approach in psychology focusing on how external environmental stimuli influence observable behavior, often ignoring internal mental states.

Foot-In-The-Door Technique

A persuasion strategy that involves getting a person to agree to a small request to increase the chances they will agree to a larger request later.