Table 17-21 The Chicken Game Is Named for a Contest in Which

question 103

Multiple Choice

Table 17-21
The Chicken Game is named for a contest in which drivers test their courage by driving straight at each other. John and Paul have a common interest to avoid crashing into each other, but they also have a personal, competing interest to not turn first to demonstrate their courage to those observing the contest. The payoff table for this situation is provided below. The payoffs are shown as (John, Paul) .
-Refer to Table 17-21. What is Paul's dominant strategy?

• A)Paul has no dominant strategy.
• B)Paul should always choose Turn.
• C)Paul should always choose Drive Straight.
• D)Paul has more than one dominant strategy.

Comprehend the impact of coupon rate and maturity on bond duration and price sensitivity to interest rate changes.

Identify key contributors to bond portfolio management theory and recognize their contributions.

Understand advanced strategies such as rate anticipation swaps, substitution swaps, and the use of convexity in portfolio management.

Understand the concept of bond duration and its calculation.

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Definitions:

Spending Multipliers

Describe the effect of a change in spending (typically by the government) on the total economic output, indicating how initial spending leads to increased levels of income and consumption.

Permanent Income

A theory suggesting that people's consumption choices are more influenced by their expected long-term average income rather than by their current income.

Consumption Spending

Expenditures by individuals and households on goods and services for personal use.

Aggregate Supply

The total supply of goods and services that firms in an economy are willing and able to sell at a given price level in a specific period.