Consider Example 18-11 and Table 18-1

question 34

Multiple Choice

Consider Example 18-11 and Table 18-1. What happens to the duration if the coupon rate was 6%, rather than the 5% shown?

• A) No change - duration is based time to maturity
• B)The duration increases to 4.57, as the YTM increases
• C) The duration decreases to 4.38, as more payments come earlier
• D) The YTM is set by the market, so it will not change.

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Definitions:

Pure Competition

A market structure characterized by a large number of small firms, similar products, and very little control over price.

Monopolistic Competition

A market structure in which many firms sell products that are similar but not identical, allowing for significant differentiation and competition.

Excess Capacity

refers to a situation where a firm or economy can produce more goods than currently demanded, often leading to unused resources.

Least-cost Output

The level of production at which a firm can produce a specified quantity of output at the lowest possible cost.