Which of the Following Is More Likely to Occur a A 100

question 103

Multiple Choice

Which of the following is more likely to occur a a 100 basis point drop in yield occurs?

• A) It creates a larger impact on bond prices when yields are high.
• B) It creates a larger impact on bond prices when yields are low.
• C) It will have the same impact on bond prices regardless whether yields are high or low.
• D) It will cause bond prices to fall in general.

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Definitions:

Combined Margin

The total margin that results from combining the gross margin and net margin of a company.

Contribution Margin Ratio

A financial metric that shows the percentage of sales revenue that is not consumed by variable costs and contributes to covering fixed costs.

Fixed Expenses

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance.

Residual Income

The amount of income that exceeds the minimum rate of return on a project or investment.