All Else Being Equal, an Increase in the Yield to Maturity

question 1

Multiple Choice

All else being equal, an increase in the yield to maturity of a bond will result in:

• A)an increase in the market price of the bond.
• B)a greater interest rate price risk on a long-term bond than on a short-term bond.
• C)an increase in the maturity value of the bond.
• D)a decrease in the rate of return at which the cash flows from the portfolios can be reinvested.
• E)a lower risk of suffering losses in the market values of the bond portfolios.

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Definitions:

Variable Cost Concept

A concept used in applying the cost-plus approach to product pricing in which only the variable costs are included in the cost amount to which the markup is added.

Fixed Manufacturing Costs

Expenses related to the production process that do not vary with the volume of production, such as salaries of supervisors and rent of the factory.

Markup

The amount added to the cost of goods to cover expenses and generate profit.

Estimated Costs

The anticipated expenses associated with a project or production, calculated before actual expenses are known.