If You Need to Sell a Bond on the Secondary

question 7

Multiple Choice

If you need to sell a bond on the secondary market before the maturity date,________.

• A)you will receive only the exact amount you invested
• B)you will receive less than face value if current interest rates are higher than your bond's coupon rate
• C)you will receive more than face value if current interest rates are higher than your bond's coupon rate
• D)you will receive less than face value if current interest rates are lower than your bond's coupon rate

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Definitions:

Surplus I

A situation where the quantity of a good or service supplied exceeds the quantity demanded, often leading to a price decrease.

Consumer Surplus

The disparity between consumers' theoretical expenditure on a good or service and their practical expenditure.

Total Surplus

The sum of consumer surplus and producer surplus, indicating the total benefits received by both producers and consumers in a market.

Equilibrium Price

The trading value at which the supply of goods meets the consumers' demand for these goods.