Consider Two Bonds, a and B

question 56

Multiple Choice

Consider two bonds, A and B.Both bonds presently are selling at their par value of $1,000.Each pays interest of $120 annually.Bond A will mature in five years, while bond B will mature in six years.If the yields to maturity on the two bonds change from 12% to 10%,

• A)both bonds will increase in value, but bond A will increase more than bond B.
• B)both bonds will increase in value, but bond B will increase more than bond A.
• C)both bonds will decrease in value, but bond A will decrease more than bond B.
• D)both bonds will decrease in value, but bond B will decrease more than bond A.
• E)None of the options

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Definitions:

Spaghetti Consumption

The amount of spaghetti consumed over a certain period, often used to measure food consumption patterns or preferences.

Consumption

The use of goods and services by households or individuals, often regarded as the final purpose of economic activity.

Utility Function

A mathematical representation that ranks individuals' preferences for sets of goods or outcomes, where higher values imply higher preference levels.

Consumptions

The act of using goods and services by households or individuals, leading to the satisfaction of their needs and wants.