Assume Market Interest Rates Have Risen Substantially in the 5

question 19

Multiple Choice

Assume market interest rates have risen substantially in the 5 years since an investor purchased Treasury bonds that were offering a 6% return over their 15-year life.If the investor sells now,he or she is likely to realize a total return that is:

• A) greater than 6%.
• B) less than 6%.
• C) equal to 2%.
• D) equal to 6%.

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Definitions:

Debt Investments

Financial assets involving funds lent to an entity (corporate or governmental) that promises to return the principal along with interest on a specified timeline.

Face Value

The nominal value stated on a financial instrument, such as a bond or stock certificate.

Brokerage Fees

Charges levied by a broker for facilitating transactions between buyers and sellers.

Unrealized Loss

A loss that occurs on paper when the current market value of an investment is lower than its cost but has not been actualized through a sale.