If the Required Return on a Bond Does Not Change

question 291

Multiple Choice

If the required return on a bond does not change from one year to the next, then ____________ over the same period (Ignore changes in default risk) .

• A) The price of a perpetual bond will rise.
• B) The price of a premium bond will rise.
• C) The price of a discount bond will fall.
• D) The price of a bond selling at par will remain unchanged.
• E) The price of a convertible bond will rise.

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Definitions:

Total Revenues

The overall amount of money generated from sales of goods or services before deducting any expenses.

Demand Elasticity

The degree to which the demand for a product changes in response to a change in its price.

Isoelastic Curve

An isoelastic curve represents a locus where the elasticity of a variable, such as demand or utility, is constant.

Market Demand

The total demand for a product or service within a given market, representing the aggregate of individual demands.