The Larger the Amount of Outstanding Public Debt

question 272

Multiple Choice

The larger the amount of outstanding public debt:

• A)the lower the tax revenue the government must collect.
• B)the more spending the government can afford.
• C)the smaller the crowding out of private investment spending.
• D)the larger the fraction of the federal budget deficit that must be devoted to interest payments.

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Definitions:

Yield To Maturity

Yield to Maturity (YTM) is the total anticipated return on a bond if the bond is held until it matures, accounting for interest payments and principal repayment.

Par Value

Par value is the face value of a bond or the stock value stated in the corporate charter, which signifies the minimum price that the securities can be issued for.

Coupon Rate

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

Current Yield

A bond’s annual coupon payment divided by its price. Differs from yield to maturity.