If You Purchase a Bond That Matures in 5 Years

question 62

Multiple Choice

If you purchase a bond that matures in 5 years but you may have to cash it in before that time,you are exposed to

• A) credit risk.
• B) default risk.
• C) interest rate risk.
• D) liquidity risk.

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Definitions:

Nonlabor Income

Income received that does not result from employment or work performed, such as dividends, interest on investments, or pensions.

Leisure

Time spent away from work and essential activities, during which an individual can engage in activities of personal interest or enjoyment.

Wage Rate

The payment received by a worker or employee per unit of time or per unit of output, typically expressed as an hourly rate or piece rate.

Perfect Market System

A market structure characterized by an ideal scenario where there are many buyers and sellers, all having perfect information and no transaction costs, leading to efficient pricing.