Use the Following to Answer Question(s)

question 189

Multiple Choice

Use the following to answer question(s) :
Exhibit: Sugar and Freight Trains

-(Exhibit: Sugar and Freight Trains) Suppose the economy is operating at point B. The opportunity cost of producing the third freight train would be:

• A) 6 tons of sugar.
• B) 19 tons of sugar.
• C) 45 tons of sugar.
• D) 80 tons of sugar.

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Definitions:

Higher-Yield Bonds

Bonds that offer higher interest rates because they have lower credit ratings, indicating higher risk of default compared to more secure bonds.

Longer Maturities

Refers to bonds or other fixed-income securities that have a longer time until the final repayment date.

Pure Yield Pickup Swap

A strategy where an investor swaps out of one bond into another with the aim of achieving a higher yield.

Price Risk

The possibility that the value of a financial instrument or asset will fluctuate due to changes in market prices, affecting investors' returns.