As a General Rule, a Promise Must Be Supported by Consideration

question 6

Multiple Choice

As a general rule, a promise must be supported by consideration. Which of the following is an exception to the rule?

• A)A non-charitable enterprise financed by the subscriptions of individuals
• B)A promise to refrain from doing what one has no right to do
• C)An act performed prior to the promise made by the promisor
• D)An obligation of record such as a judgment

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Definitions:

Inflation Premium

The extra yield that investors demand on securities to compensate for the risk of inflation reducing the value of future cash flows.

Fisher Effect

The Fisher Effect describes the relationship between nominal interest rates, real interest rates, and inflation, asserting that the nominal interest rate is equal to the real interest rate plus inflation.

Interest Rate Risk

The risk of changes in interest rates that can adversely affect the value of an investment.

Term Structure

The relationship between interest rates or bond yields and different terms or maturities, depicted in a curve.