Figure 6.7 -Refer to Figure 6.7.The Change in the Budget Constraint from Budget

question 160

Multiple Choice

Figure 6.7
-Refer to Figure 6.7.The change in the budget constraint from BC₁ to BC₂ implies

• A)the prices of DVDs and CDs have increased.
• B)income and the prices of DVDs and CDs have increased.
• C)the price of DVDs has increased and the price of CDs has decreased.
• D)the price of DVDs has decreased and the price of CDs has increased.

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Definitions:

Maturity

Refers to the final payment date of a loan or other financial instrument, at which point the principal (and all remaining interest) is due to be paid.

Zero-Coupon Bond

A debt security that does not pay interest but is traded at a deep discount, providing profit at maturity when it is redeemed for its face value.

Duration

A measure of the sensitivity of the price of a bond or other debt instrument to changes in interest rates, representing the weighted average time to receive the bond's cash flows.

Coupon

A voucher entitling the holder to a discount for a particular product or service.