Figure 5-9 -Refer to Figure 5-9.A Decrease in Price from $15 to Price

question 367

Multiple Choice

Figure 5-9

-Refer to Figure 5-9.A decrease in price from $15 to $10 leads to a

• A) decrease in total revenue of $10, so the price elasticity of demand is greater than 1 in this price range.
• B) decrease in total revenue of $10, so the price elasticity of demand is less than 1 in this price range.
• C) decrease in total revenue of $20, so the price elasticity of demand is less than 1 in this price range.
• D) decrease in total revenue of $20, so demand is elastic in this price range.

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Definitions:

Striking Price

The predetermined price at which the holder of an option contract can buy (call) or sell (put) the underlying asset.

Callable Bonds

Callable bonds are bonds that can be redeemed by the issuer prior to their maturity date at a specified call price.

Convertible Bonds

Bonds that can be converted into a predetermined number of the issuing company's shares at certain times during its life, usually at the discretion of the bondholder.

Warrants

Financial derivatives that give the holder the right, but not the obligation, to buy or sell a security, usually equity, at a predetermined price before expiration.