If the Interest Rate on a Bond Is Below the Equilibrium

question 156

Multiple Choice

If the interest rate on a bond is below the equilibrium interest rate,there is an excess ________ of bonds and the bond price will ________.

• A)demand;rise
• B)demand;fall
• C)supply;rise
• D)supply;fall

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Definitions:

Prompt Payment

The act of settling a transaction or invoice on or before the due date.

Financing Cost

The interest and other costs incurred by a company to borrow funds or access other forms of financing.

Bad Debt

Money owed to a company that is not expected to be paid by the debtor, often leading to a write-off.

Credit Policy

A Credit Policy is a set of guidelines that govern the extension of credit to customers, outlining the criteria for extending credit and the terms of repayment.