Which of the Following Is Likely to Have a Negative

question 25

Multiple Choice

Which of the following is likely to have a negative effective duration?

• A) A high coupon, interest only mortgage-backed security that is pre-paying at a high rate.
• B) A low coupon U.S. Treasury bond.
• C) Fed Funds purchased.
• D) Demand deposits
• E) None of the above can have a negative effective duration.

---

Definitions:

Maximize Profits

The process of determining the best price and output level that leads to the highest possible profit for a business.

Senior Citizens

Individuals who have reached a certain age, often associated with retirement and receiving certain benefits due to their age.

Income Elasticity

A measure of how the quantity demanded of a good changes in response to a change in consumers' income.

BMW

A German multinational company that produces luxury vehicles and motorcycles.