Which of the Following Relationships Does NOT Hold in the Pricing

question 110

Multiple Choice

Which of the following relationships does NOT hold in the pricing of fixed-rate assets given changes in market rate?

• A)A decrease in interest rates generally leads to an increase in the value of assets.
• B)Longer maturity assets have greater changes in price than shorter maturity assets for given changes in interest rates.
• C)The absolute change in price per unit of maturity time for given changes in interest rates decreases over time, although the relative changes actually increase.
• D)For a given percentage decrease in interest rates, assets will increase in price more than they will decrease in price for the same, but opposite increase in rates.
• E)None of the above.

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Definitions:

Nuclear Reactors

Devices used to initiate and control a sustained nuclear chain reaction, primarily for the generation of electricity or for the production of nuclear materials for medical or military use.

Coal Reserves

Quantities of discoverable coal resources that can be economically and legally extracted at current prices.

Reactor Core Meltdown

A severe nuclear reactor accident characterized by the melting of the core components, leading to potential radiation release.

Fossil Fuels

Natural fuels such as coal, oil, and natural gas, formed from the fossilized remains of ancient plants and animals.