The Price of a New Car Is $40,000 While the Price

question 411

Multiple Choice

The price of a new car is $40,000 while the price of a five-year old car of the same brand is $16,000. The next year the price of the new car increases to $44,000 and the price of a five-year old car of the same brand is $17,600. The relative price of the used car

• A) decreased by $2,400.
• B) decreased by 10 percent.
• C) increased by 10 percent.
• D) remained constant at 0.4.

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Definitions:

Market Interest Rate

The prevailing rate of interest available in the marketplace for securities of similar risk and maturity.

Coupon Rate

The coupon rate represents the yearly interest percentage that is paid out on a bond, depicted as a proportion of its nominal value.

Premium

The amount by which the price of a financial instrument or asset exceeds its face value or principal amount, often related to bonds or insurance products.

Discount

A reduction in the price of a good or service, or in finance, the process of determining the present value of a payment or stream of payments that is to be received in the future.