When People Begin to Expect a Large Run Up in Stock

question 82

Multiple Choice

When people begin to expect a large run up in stock prices,the demand curve for bonds shifts to the ________ and the interest rate ________.

• A) right; rises
• B) right; falls
• C) left; falls
• D) left; rises

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Definitions:

Annuity

A level stream of cash flows for a fixed period of time.

Preferred Stock Dividends

Dividends that are paid to preferred stockholders before any dividends are paid to common stockholders.

Perpetuity

A type of annuity that pays an infinite series of cash flows, with the first payment occurring one period from now, indefinitely into the future.

Future Value Factor

A multiplier used to calculate the estimated future value of a current investment or cash flow at a specified rate of return.