Everything Else Held Constant, If the Expected Return on Government

question 9

Multiple Choice

Everything else held constant, if the expected return on government bonds falls from 8 to 7 percent and the expected return on corporate bonds falls from 10 to 8 percent, then the expected return of corporate bonds ________ relative to government bonds and the demand for corporate bonds ________.

• A) rises; rises
• B) rises; falls
• C) falls; rises
• D) falls; falls

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