The Bond Supply Curve Slopes Up Because

question 22

Multiple Choice

The bond supply curve slopes up because

• A)interest rates rise as bond prices rise.
• B)when bond prices are high, inflation is high.
• C)the lender is willing and able to offer more bonds when the price of the bond is low.
• D)the borrower is willing and able to offer more bonds when the price of the bond is high.

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Definitions:

Accounting Rate of Return

A financial ratio that measures the return on investment from a project based on its net income.

Time Value of Money

The concept that money available today is worth more than the same amount in the future due to its earning capacity.

Net Present Value

The variance between the current worth of incoming cash and the current worth of outgoing cash throughout a specific time frame.

Cost of Capital

The rate of return a company must earn on its investment projects to maintain its market value and attract funds.