A Bond's Price Changes 2% When Interest Rates Drop

question 28

True/False

A bond's price changes 2% when interest rates drop. The duration model would predict a price increase of more than 2%.

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Definitions:

Economy-Wide Interactions

The relationships and exchanges between different economic agents and sectors within an entire economy.

Recession

A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

Congress

The national legislative body of the United States, consisting of the Senate and the House of Representatives.

Individual Choices

The decisions made by individuals based on preferences, income, and prices that determine what goods and services they acquire.