The Adage,"There Is No Such Thing as a Free Lunch

question 12

Multiple Choice

The adage,"There is no such thing as a free lunch," is used to illustrate the principle that

• A)goods are scarce.
• B)people face tradeoffs.
• C)income must be earned.
• D)households face many decisions.

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Definitions:

Basis Points

One basis point is equal to 1/100th of 1%, used primarily to denote the change in interest rates, equity indexes, and the yield of fixed-income securities.

Price Decline

A decrease in the market price of an asset or security.

Duration

A measure of the sensitivity of the price of a bond or other fixed-income investment to a change in interest rates, often expressed in years.

Price Volatility

The rate at which the price of an asset increases or decreases for a given set of returns, indicative of the risk or stability.