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Which of the Two Bonds in Each Example Would You

question 166

Essay

Which of the two bonds in each example would you expect to pay the higher interest rate? Explain why.
a.a Canadian government bond or a bond issued by the government of Turkey
b.a government of Canada bond or a municipal bond of the same face value and term
c.a 6-month Treasury bill or a 20-year bond
d.a Canadian National Railway Company bond or a bond issued by a new fitness clothing company


Definitions:

Purely Competitive Firm

A business that operates in a market with infinite buyers and sellers, no barriers to entry, and a standard product, leaving the company as a price taker.

Unitary Elasticity

A situation in economics when a change in the price of a product leads to an equal proportionate change in the quantity demanded or supplied.

Marginal Revenue

The additional income received from selling one more unit of a good or service; it is an important concept for determining the optimal level of output for a company.

Purely Competitive Firm

A company operating in a market where there are many buyers and sellers, the products are homogeneous, and there are no barriers to entry or exit.

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