An Asset That Earns a Fixed Sum of Money Each

question 53

Multiple Choice

An asset that earns a fixed sum of money each year for its owner will

• A) provide the same rate of return regardless of its cost.
• B) provide its owner with a capitalized value equal to its annual payment.
• C) have its present value capitalized each time the annual payment is received.
• D) yield a lower rate of return when its price declines.
• E) decline in price when the market rate of interest rises.

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Definitions:

Base-Year Prices

Prices of goods and services from a specific base year, used to calculate real values and remove the effect of inflation over time.

Real GDP

Gross Domestic Product adjusted for inflation, measuring the value of goods and services produced by a country in a specified period.

Measured

Quantitatively determined or estimated through a standard or unit of measurement.

Gross Domestic Product

The total value of all goods and services produced over a specific time period within a country's borders, used as a comprehensive measure of economic activity.