Refer to the Figure Below

question 115

Multiple Choice

Refer to the figure below. Suppose all the sellers in this market started out charging a price of $45 per unit. What is the most likely result?

• A) They would all make a large profit because $45 is more than the equilibrium price.
• B) They would all just break even because $45 is their reservation price.
• C) They would lower their prices because at $45 there would be excess supply.
• D) They would lower their prices because at $45 there would be excess demand.

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Definitions:

Annual Coupon

refers to the fixed interest payment that a bond issuer agrees to pay to the bondholder once every year until the bond's maturity date.

Zero-Coupon Bond

A bond that is issued at a discount to its face value but pays no interest; the investor's return is the difference between the purchase price and the face value at maturity.

Par Value

The face value of a bond or stock, representing the amount that the issuer agrees to pay at maturity or the nominal value assigned to a share of stock for accounting purposes.

Yield To Maturity

The total return anticipated on a bond if it is held until it matures, incorporating both interest payments and the increase or decrease in the bond's value to its face value at maturity.