The Return on Bonds Rises Relative to Other Assets, in the Bond

question 121

Multiple Choice

The return on bonds rises relative to other assets, in the bond market this will result in:

• A) the price of bonds falling and the yields increasing.
• B) a rightward shift in the bond supply curve.
• C) a shift to the left of the bond demand curve.
• D) an increase in bond prices.

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Definitions:

Bond Redemption

The process of repaying the principal amount of a bond at or before its maturity date.

Carrying Value

The book value of an asset as shown in the company's balance sheet, representing the cost of the asset minus accumulated depreciation or amortization.

Effective-Interest Method

A technique used in accounting to allocate the interest expense or income over the life of a financial instrument based on its carrying amount.

Interest Expense

The cost incurred by an entity for borrowed funds, recognized as a financial charge over the repayment period.