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:

Equilibrium

The state in which market supply and demand balance each other, resulting in stable prices.

Normal Goods

Goods for which demand increases when consumer income rises, and decreases when consumer income falls.

Consumption

The use of goods and services by households or individuals, constituting one of the primary components of an economy's aggregate demand.

Consumer Preferences

The inclinations or choices of individuals or groups regarding various goods and services that reflect taste, convenience, affordability, and other factors.