The Option Adjusted Duration Will Approach the Duration to Maturity

question 91

Multiple Choice

The option adjusted duration will approach the duration to maturity, when

• A) interest rates are significantly above the coupon rate because the option has very little chance of being called, and the call option will have very little value.
• B) interest rates are significantly below the coupon rate because the option has very little chance of being called, and the call option will have very little value.
• C) interest rates are significantly above the coupon rate because the option has a high chance of being called, and the call option will have significant value.
• D) interest rates are significantly below the coupon rate because the option has a high chance of being called, and the call option will have significant value.
• E) None of these are correct.

Explain the dynamics of representative democracy and its potential to lead to inefficient government programs due to the distribution of costs and benefits.

Understand the lack of incentives for operational efficiency in the public sector and the factors contributing to it.

Recognize the predictable side effects of increased government activity, such as rent-seeking behavior.

Comprehend why elected representatives may prefer borrowing for financing current government programs.

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Definitions:

Coping Strategies

Methods or techniques used to manage stress, adapt to challenging situations, and maintain mental health.

Stress

A physical or psychological response to external pressures or demands, often characterized by feelings of tension or strain.

Committing Suicide

The act of intentionally causing one's own death.

Mental Illness

A broad range of medical conditions that affect a person's thinking, feeling, mood, and behavior, which can be chronic or episodic in nature.