The Required Return on a Bond Is Equal to

question 6

Multiple Choice

The required return on a bond is equal to

• A) the real rate of return plus a risk premium plus an expected inflation premium.
• B) the real rate of return plus the coupon rate plus an inflation rate.
• C) the risk-free rate plus a risk premium plus an expected inflation premium.
• D) the real rate plus a risk premium.

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Definitions:

Consumer Surplus

The variation between the sum consumers are willing to allocate for a good or service and the sum they actually allocate.

Surplus II

An additional amount of a resource, product, or service that exceeds the amount demanded or utilized.

Consumer Surplus

The discrepancy between what consumers are willing to spend on a good or service and their actual expenditures.

Surplus II

An excess of supply over demand in the market, leading to excess goods and potential lower prices.