An Speculator Who Buys a Fifty-Year Corporate Bond

question 96

Multiple Choice

An speculator who buys a fifty-year corporate bond

• A) must be expecting to still be alive in fifty years.
• B) is subject to substantial reinvestment risk.
• C) is probably expecting market interest rates to increase in the future.
• D) is probably expecting market interest rates to decrease in the future.

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Definitions:

Marginal Propensity

The tendency of an individual or household to spend an extra unit of currency, reflecting the change in consumption from a change in income.

Unplanned Inventory

Excess goods that businesses unintentionally accumulate due to lower-than-expected demand, leading to potential adjustments in production or pricing strategies.

Real GDP

stands for Real Gross Domestic Product, which measures the value of all goods and services produced by an economy over a specific period, adjusted for inflation.

Aggregate Expenditure

The total amount of spending in an economy, including consumption, investment, government purchases, and net exports.