Three-Year-Old Steven Walks Up to His Father, Who Is Reading

question 59

Multiple Choice

Three-year-old Steven walks up to his father, who is reading the newspaper, and says "Look at this picture, Daddy!" If his father does not respond, Steven is likely to

• A) repeat his remark to try again to get a response.
• B) keep talking about his picture as if his father had answered.
• C) walk away.
• D) think his comment does not deserve a response.

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Definitions:

Promised Yield

The return that a bond issuer agrees to pay to the bondholder until maturity, expressed as an annual percentage.

Coupon Rate

The annual interest rate paid by a bond issuer to the bondholder, usually expressed as a percentage of the bond's face value.

Duration

A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates, often expressed in years.

Perpetuities

A type of annuity that receives an infinite series of identical cash flows with no end.