Will an Increase in Inflation Have a Larger Impact on the Price

question 23

Multiple Choice

Will an increase in inflation have a larger impact on the price of a bond or preferred stock?

• A) The bond.
• B) The preferred stock.
• C) The impact will be the same.
• D) Inflation doesn't affect either the bond or the preferred stock price.

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Definitions:

Ordinary Simple Interest

Interest calculated on the principal amount only, without compounding, usually over a period of a year or less.

360-Day Year

A financial convention or calculation basis where the year is assumed to consist of 360 days rather than 365 or 366 days, often used in interest rate calculations.

Ordinary Simple Interest Rate

The standard method of calculating interest, typically based on the original loan amount, rate, and time.

360-Day Year

A conventional method in finance where the year is assumed to have 360 days for simplifying interest rate calculations, commonly used in commercial lending.