Which of the Following Is an Example of a Negative

question 244

Multiple Choice

Which of the following is an example of a negative externality?

• A) A Japanese company begins to produce cars, which causes American workers to lose their jobs.
• B) An employee of a chemical company spills acid on his arm, causing severe damage.
• C) John plants fruit trees in his front yard, which attracts bees, which sting neighbor Mary.
• D) Sally buys coffee at McDonald's, spills some on her, and burns her arm.
• E) Jack attempts to fix his roof, falls off, and breaks his leg.

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Definitions:

Serial Bonds

Bonds issued under a single series where each bond matures at a different date, allowing the issuer to spread out repayment over time.

Staggered Maturity Dates

A strategy involving financial instruments or liabilities that have various maturity dates spread out over time to reduce risk and improve liquidity.

Coupon Bond

A debt security that pays the bondholder a fixed interest rate (coupon) periodically until the bond's maturity date, at which point the principal amount is repaid.

Yield To Maturity

The total return anticipated on a bond if the bond is held until it matures, considering both interest payments and the principal appreciation or depreciation.