If Zero Rates (I

question 16

Multiple Choice

If zero rates (i.e. ,discount rates) are the same for all maturities and remain the same over the next year,the price of a zero-coupon bond that matures ten years from today will:

• A)Decrease over the next year
• B)Remain the same over the next year
• C)Increase over the next year
• D)Cannot tell with the given information

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Definitions:

Specifically Outlined

Described or detailed in a clear and explicit manner, leaving no room for ambiguity.

Acts

Formal decisions, laws, or statutes enacted by a government's legislative body.

Agency Coupled

A principal-agent relationship that cannot be terminated at will by the principal because it includes an interest beneficial to the agent.

Principal

The original amount of money loaned or invested, separate from interest or earnings.