Positive Convexity on a Bond Implies That

question 33

Multiple Choice

Positive convexity on a bond implies that

• A) prices increase at a faster rate as yields drop, than they decrease as yields rise.
• B) the direction of change in yield is directly related to change in price
• C) price changes are the same for both increase and decrease in yields
• D) prices increase and decrease at a faster rate than the change in yield

Understand the implications of check clearing on the money supply.

Illustrate the influence of reserve requirements on monetary policy and the calculation of deposit multipliers.

Understand the concept of make-or-buy decisions and how to calculate the total costs associated.

Identify the advantages and disadvantages of outsourcing parts of production.

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Definitions:

Marginal Cost

The financial increase associated with the generation of one more unit of a product or service.

Average Variable Cost

The variable cost per unit of output, calculated by dividing the total variable costs by the quantity of output produced.

Market Price

The prevailing cost at which a service or product can be acquired or disposed of in a marketplace.

Marginal Cost

The cost of producing one more unit of a good or service, which can vary depending on the level of production.