The Duration of a 2 Year Annual 10% Bond That

question 10

Multiple Choice

The duration of a 2 year annual 10% bond that is selling for par is:

• A) 1.00 years.
• B) 1.91 years.
• C) 2.00 years.
• D) 2.09 years.
• E) None of these.

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Definitions:

Economies of Scale

Economies of scale refer to the benefits companies achieve through large-scale production, which typically results in a reduction of the cost per unit as production volumes increase.

Economies of Scale

Refers to the cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output decreasing with increasing scale.

Diminishing Returns

A principle stating that if one factor of production is increased while other factors are held constant, the output per unit of the variable factor will eventually decrease.

Fixed Resources

Assets and inputs in production that remain constant regardless of the level of output.