Bond Prices Are ________ Sensitive to Changes in Yield When

question 36

Multiple Choice

Bond prices are ________ sensitive to changes in yield when the bond is selling at a ________ initial yield to maturity.

• A) more; lower
• B) more; higher
• C) less; lower
• D) equally; higher or lower

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Definitions:

Explicit Costs

Direct, out-of-pocket expenses incurred by a firm or individual for business operations or activities.

Accounting Profits

The financial gain calculated by subtracting total explicit costs from total revenues, using generally accepted accounting principles.

Economic Profits

Profits calculated by subtracting both explicit and implicit costs from total revenues; also known as supernormal profits.

Implicit Costs

Costs that represent the opportunity costs of using resources owned by the firm for its own production rather than selling those resources.