A Negative Value for the Cross Elasticity of Demand Between

question 63

Multiple Choice

A negative value for the cross elasticity of demand between two goods indicates that

• A) the goods are substitutes.
• B) the goods are complements.
• C) one of the goods is normal and the other is inferior.
• D) each good is price inelastic.

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Definitions:

Duration-based Immunization

A strategy used in portfolio management to minimize the risk of interest rate fluctuations by matching the duration of assets and liabilities.

Rebalanced

The process of realigning the weightings of a portfolio of assets to maintain an original or desired level of asset allocation or risk.

Modified Duration

A measure of the price sensitivity of a bond or other debt instrument to an interest rate change, factoring in the changing cash flow timings.

Price-volatile

Characteristic of a financial instrument whose price can undergo significant fluctuations in a short period.