Use the Following Figure to Answer the Questions

question 10

Multiple Choice

Use the following figure to answer the questions :

-In the figure above,the price of bonds would fall from P₁ to P₂

• A)inflation is expected to increase in the future.
• B)interest rates are expected to fall in the future.
• C)the expected return on bonds relative to other assets is expected to increase in the future.
• D)the riskiness of bonds falls relative to other assets.

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Definitions:

Call Contract

A financial contract that gives the buyer the right, but not the obligation, to buy an asset or security at a predetermined price within a specific time period.

Premium

The additional amount above the nominal or face value that an investor pays to buy a security or the cost to purchase an insurance policy.

MBI Stock

Refers to the stock of a specific company identified by the ticker symbol MBI, typically requiring further context or identification of the company.

Put Contract

A put contract is a financial agreement giving the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time frame.