Use the Following Three Statements to Answer This Question

question 54

Multiple Choice

Use the following three statements to answer this question:
I.The prices of bonds with higher durations are more sensitive to interest rate changes than are those with lower durations.
II.All else being equal, durations will be higher when (1) market yields are lower, (2) bonds have longer maturities, and (3) bonds have lower coupons.
III.Duration is a measure of risk of the bond

• A)I is correct, II, III are incorrect.
• B)I is incorrect, II, III are correct.
• C)I, II and III are correct.
• D)I, II and III are incorrect.

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Definitions:

Comparative Advantage

The capacity of a country or firm to produce a particular good or service at a lower marginal and opportunity cost over another.

Absolute Advantage

The ability of a country or entity to produce a good or service more efficiently (using fewer resources) than another country or entity.

Specialization

Refers to the process of focusing resources on specific activities, tasks, or areas of expertise to increase efficiency and productivity.

Free Trade

An economic policy that allows imports and exports between countries without tariffs, quotas, or other restrictions.