Which of the Following Is Correct Regarding the Present Value

question 149

Multiple Choice

Which of the following is correct regarding the present value calculations associated with bonds?

• A)The amount of interest a bond pays is fixed over its life.
• B)The market interest rate varies from day to day and is the rate used to determine the bond's present value.
• C)The amount investors are willing to pay for a bond varies because the bond's present value changes as the market interest rate changes.
• D)All of these choices.

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Definitions:

Excise Tax

An excise tax is a tax imposed on the sale of specific goods and services, such as tobacco, alcohol, and gasoline, often levied at the time of purchase.

Demand Curves

Graphical representations showing the relationship between the price of a good and the quantity demanded.

Supply Curves

Supply curves graphically represent the relationship between the price of a good or service and the quantity of it that suppliers are willing to produce and sell.

Equilibrium Quantity

The quantity at which the intentions of buyers and sellers in a particular market match at a particular price such that the quantity demanded and the quantity supplied are equal; the profit-maximizing output of a firm.