If a Bond's Volatility Is 10% and the Interest Rate

question 50

Multiple Choice

If a bond's volatility is 10% and the interest rate goes down by 0.75% (points) then the price of the bond:

• A) decreases by 10%
• B) decreases by 7.5%
• C) increases by 7.5%
• D) increases by 0.75%

---

Definitions:

Factory Overhead Allocation

The process of distributing indirect manufacturing costs, such as utilities and rent, across various products based on a predetermined rate or method.

Service Companies

Businesses that provide services to consumers or other businesses rather than producing goods.

Activity-Based Costing

A pricing approach that allocates overhead and indirect expenses to associated goods and services according to their consumption of resources.

Product Costs

Costs that are directly associated with the creation of a product, including materials, labor, and manufacturing overhead.