Suppose a bond promises to pay its holder $100 a year forever. The interest rate on the bond rises from 4 percent to 5 percent. The price of the bond
A) falls from $2,500 to $2,000.
B) does not change because it is not affected by the interest rate.
C) falls from $25,000 to $20,000.
D) rises from $2,000 to $2,500.
A
You might also like to view...
Which of the following is not considered as a factor of production?
A) money B) machinery and equipment C) land D) unskilled labor
Which of the following types of goods are rival in consumption?
a. private goods and club goods b. private goods and common resources c. public goods and club goods d. public goods and common resources
Being penalized via taxes for making more money in dollars even though your purchasing power hasn't changed at all is called:
A. shoe-leather costs. B. menu costs. C. the velocity of inflation. D. tax distortion.
If the government ________ taxes to pay for spending on infrastructure, the result will most likely be a(n) ________ in capital deepening.
A. increases; increase B. decreases; increase C. increases; decrease D. eliminates; elimination