If the Inflation Premium for a Bond Goes Up, the Price

question 96

Multiple Choice

If the inflation premium for a bond goes up, the price of the bond

• A)is unaffected.
• B)goes down.
• C)goes up.
• D)More information is needed for an answer.

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Definitions:

Expected Return

The anticipated amount of profit or loss an investment generates over a given period of time.

Defined Benefit Plan

A type of pension plan where the employer guarantees a specified pension payment upon retirement, based on the employee's earnings history, tenure of service, and age, rather than directly depending on individual investment returns.

Noncontributory Plan

A type of pension plan or benefit program where the employer fully funds the benefits without required contributions from the employees.

Pension Reform Act

Legislation aimed at improving, modifying, or reforming the guidelines and operations of pension schemes and retirement benefits.