Suppose the Market Interest Rate Is Stable at 4% and We

question 124

Multiple Choice

Suppose the market interest rate is stable at 4% and we see a decline in bond prices (and thus a rise in bond yields) .One explanation for this is that

• A)bond issuers are facing an excess demand for their bonds.
• B)bond purchasers perceive a reduction in riskiness and thus a higher expected present value from those bonds.
• C)there is no causal relationship between market interest rates and bond prices.
• D)bond purchasers perceive an increase in riskiness and thus a lower expected present value from those bonds.
• E)there is a positive relationship between interest rates and bond prices.

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Definitions:

Natural Resistance

Natural resistance refers to the innate ability of an organism to fend off diseases, pests, or various environmental stresses without the assistance of modern scientific methods.

Central Selling Feature

A key attribute or benefit of a product that sets it apart from its competitors and is emphasized in marketing efforts.

Incentive

Something that motivates or encourages someone to do something.

Quick Action

Immediate or prompt response to a situation, often requiring decisiveness and efficiency.