Which of the Following Statements Is TRUE

question 58

Multiple Choice

Which of the following statements is TRUE?

• A) The more liquid the bond, the lower the yield.
• B) Tax-free bonds normally have a higher interest rate than other types of bonds.
• C) The price of a bond increases as it becomes more risky.
• D) The yield curve illustrates the relative default risks of alternative types of bonds.

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Definitions:

Preferences

Describes individuals' choices and priorities among different bundles of goods and services.

Indifference Curves

A graph showing a series of lines that represent different bundles of goods between which a consumer is indifferent.

Diminishing Marginal

Refers to a principle where the marginal gain (such as utility or productivity) from an additional unit decreases as more units are consumed or produced.

Transitivity

Transitivity in decision-making implies that if a person prefers option A over B, and B over C, then the person should also prefer A over C, forming a consistent order of preferences.