In Figure 1

question 23

Multiple Choice

In Figure 1.9,the slope of the line between points L and M is

• A)1.20.
• B)0.80.
• C)0.75.
• D)0.67.

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Definitions:

Reinvestment Rate

The rate at which an investor plans to reinvest interest or dividend income from an investment.

Zero-Coupon Bonds

Bonds that don't pay periodic interest payments, but are sold at a discount from their face value and mature at that face value.

Expected Interest Rate

The anticipatory rate at which interest is projected to be applied on borrowed funds or received on investments.

Premium To Par

The amount by which the price of a bond exceeds its principal (or par) value, often occurring when the bond's interest rate is higher than current market rates.