An Investor Who Expects Declining Interest Rates Would Maximize Their

question 59

Multiple Choice

An investor who expects declining interest rates would maximize their capital gain by purchasing a bond that has a ___ coupon and a ___ term to maturity.

• A) low; long
• B) high; short
• C) high; long
• D) zero; long

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Definitions:

Price

The monetary value estimated, obligatory, or presented in compensation for an object.

MC

Short for Marginal Cost, it refers to the increase in cost that arises from producing one additional unit of a good or service.

ATC

Average Total Cost (ATC) refers to the total cost per unit of output, calculated by dividing the total cost of production by the quantity of output produced.

MR

Marginal Revenue is the additional income generated from selling one more unit of a good or service.