How Are Treasury Bond Prices Affected When the Interest Rate

question 6

Multiple Choice

How are Treasury bond prices affected when the interest rate rises?

• A)The purchaser of the bond needs to spend less money to obtain a given number of dollars of interest per year, so the price of the bond must decrease.
• B)The purchaser of the bond needs to spend more money to obtain a given number of dollars of interest per year, so the price of the bond must increase.
• C)The purchaser of the bond needs to spend more money to obtain a given number of dollars of interest per year, so the price of the bond must decrease.
• D)The purchaser of the bond needs to spend less money to obtain a given number of dollars of interest per year, so the price of the bond must increase.

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Definitions:

Variable Costs

Expenses that vary directly with the level of production or output, such as materials and labor.

Fixed Costs

Expenses that do not change in proportion to the activity of a business, such as rent, salaries, and equipment maintenance costs.

Market Skimming

A pricing strategy where a firm charges the highest initial price that customers will pay and then lowers it over time as the demand of the first set of customers is satisfied.

Product Innovation

The process of creating new or significantly improved products, enhancing their features, functionality, or design to meet consumer needs or open new markets.