The Required Rate of Return on a Certain Bond Changes

question 32

Multiple Choice

The required rate of return on a certain bond changes from 12 percent to 8 percent, causing the price of the bond to change from $900 to $1,100. The bond price elasticity of this bond is

• A)-0.36.
• B)-0.44.
• C)-0.55.
• D)-0.67.
• E)0.67.

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Definitions:

Overtime

The amount of time someone works beyond the normal working hours, often resulting in additional pay.

Annual Salary

The total amount of money that an individual earns in one year from their job before taxes and deductions.

Gross Earnings

The total amount of income earned by an individual or generated by a business before any deductions like taxes or expenses are applied.

Production In Excess

The situation when the quantity of goods produced exceeds the demand or expected sales volume.