Which of the Following Is True

question 24

Multiple Choice

Which of the following is true?

• A)The remaining monthly payments and the current discount factor determine the present value of a mortgage and hence the price at which the mortgage will trade.
• B)The risk-free return is composed of the return on a Treasury security of comparable maturity.
• C)If the value of mortgages falls-say because of increasing interest rates-the asset side of bank balance sheets falls. However, the liabilities of a bank (i.e., deposits) do not fall. This may result in a bank's (or the banking system's) liabilities becoming greater than its assets.
• D)All of the above are true.

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Definitions:

Total Revenue

The total receipts a firm receives from sales of its product or services.

Total Revenue

The overall amount of money generated by a firm from selling its goods or services, calculated as the unit price multiplied by the quantity sold.

Perfectly Inelastic Demand

The case in which the quantity demanded does not respond at all to changes in the price; the demand curve is a vertical line.

Demand Curves

A graph representing the relationship between the price of a good and the quantity of that good buyers are willing to purchase at various prices.