If Yields on Treasury Bonds Rise

question 31

Multiple Choice

If yields on Treasury bonds rise

• A)the value of the corresponding bonds will rise and the value of interest rate index options will fall.
• B)the value of the corresponding bonds and the value of interest rate index options will both fall.
• C)the value of the corresponding bonds will fall and the value of interest rate index options will rise.
• D)the value of the corresponding bonds and the value of interest rate index options will both rise.

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Definitions:

Risk-Free Rate

The theoretical rate of return of an investment with zero risk, often represented by the yield on government securities like Treasury bonds.

Retained Earnings

The part of a company's earnings that is not distributed as dividends but is instead held back by the company.

Dividend Growth

The increase in the dividend payout issued by a company over time, reflecting its growing earnings or cash flow.

Flotation Costs

Costs borne by a firm for the release of new stocks, encompassing fees for underwriting, legal advice, and registration.