If the Level of Interest Rates Increases,then the Current Value

question 146

Multiple Choice

If the level of interest rates increases,then the current value and price of a bond paying a fixed interest payment will

• A)remain unchanged since its underlying value,the interest payment is fixed.
• B)fall since new bonds offer higher rates.
• C)rise since new bonds offer higher rates.
• D)first rise then fall as bond investors calculate the effects of the change in rates.

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Definitions:

Principal

A person or entity who authorizes an agent to act on their behalf in dealings with third parties.

Constructive Trust

A legal remedy imposed by a court to address unjust enrichment or fraud, requiring the person holding the assets to transfer them to the intended party.

Lakeside Property

Real estate located adjacent to or near a lake, often highly valued for its view, recreational opportunities, and environmental quality.

Possession

The actual holding or control of something, such as property or goods, often implying ownership or a right to control.