If the Interest Rate Is R and Will Remain R

question 16

Multiple Choice

If the interest rate is r and will remain r forever, then a bond that will pay 75 dollars a year forever, starting one year from now, is worth how much today?

• A)75/(1 + r)dollars.
• B)75(1 + r)dollars.
• C)75/(1 + r + r² +.......+ r ⁿ +.......)dollars.
• D)75/r dollars.
• E)None of the above.

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Definitions:

Physical Arousal

A physiological response of the body to a stimulus, resulting in increased physical activity and alertness, often associated with sexual or emotional stimuli.

Cognitive Interpretation

a mental process that involves understanding and assigning meaning to perceptions, sensations, and information.

Schachter and Singer

Two psychologists known for their theory on emotion, suggesting that physiological arousal is interpreted in the context of the environment to produce the emotional experience.

Physical Arousal

A physiological response of the body to sexual attraction or excitement, involving increased blood flow, heart rate, and erection or lubrication.