The price of bonds and the interest rate are
a) positively related
b) negatively related
c) sometimes positively related and other times negatively related, depending on the bond payments
d) not related
Answer: b) negatively related
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Gamble A results in $10 with probability 0.4 and $30 with probability 0.6. Gamble B results in $20 with probability 1. If an individual prefers Gamble A to Gamble B, the independence axiom implies that he prefers Gamble C that gives $0 with probability 0.5, $10 with probability 0.2 and $30 with probability 0.3 to Gamble D that results in $20 with probability 0.5 and $0 with probability 0.5.
Answer the following statement true (T) or false (F)
Which of the following explanations, if true, for the observation that 80% of your company's employees choose not to opt into the company's optional retirement plan would be the LEAST consistent with standard economic theory?
A. Company-sponsored retirement plans tend to have lower-than-average returns over the long run. B. Company-sponsored retirement plans tend to have higher-than-average costs compared to other retirement saving instruments. C. When confronted with alternatives, people sometimes avoid making a choice and end up with the option that is assigned as a default. D. Across all employers, the average rate of retirement plan enrollment tends to be about 20%, which is consistent with the low demand for retirement plans.
Consider the competitive market for oil. Which of the following would result from the discovery of new oil fields that can be profitably accessed at the current price?
a. both b and d b. an increase in the demand for oil c. an excess demand for oil as oil companies shift resources to developing the new fields d. an excess supply of oil if the price of oil fails to drop sufficiently e. an increase in the expected future price of oil
Calculate the holding period return for a $1,000 face value bond with a $60 annual coupon purchased for $970.00 and sold three years later for $1,060.00.
What will be an ideal response?