23-101 Using the Above Information,what Will Happen to the Market

question 40

Multiple Choice

23-101 Using the above information,what will happen to the market value of the Eurobonds if market interest rates fall 1 percent to 9 percent?

• A)Increase $8,018,182.
• B)Decrease $8,018,182.
• C)Decrease $4,354,545.
• D)Increase $6,735,272.
• E)Increase $4,354,545.

---

Definitions:

Substitution Effect

The change in demand for a good or service caused by a change in its price, making consumers replace it with a cheaper alternative.

Income Effect

A change in consumption patterns resulting from a change in real income due to variations in prices, other factors remaining constant.

Savings Rate

The proportion of disposable income that is saved by individuals or entities, rather than spent, often expressed as a percentage.

Interest Rates

The cost of borrowing money, expressed as a percentage of the amount borrowed, charged by lenders to borrowers for the use of their money.