Explain the differences between a corporate bond, a municipal bond, and a Treasury bond. Which of these would be the least risky investment, and why?
What will be an ideal response?
Corporate bonds are issued by corporations, while municipal bonds and Treasury bonds are both issued by the government. Municipal bonds are issued by state and local governments, and Treasury bond is issued by the federal government. The Treasury bond would be the least risky investment since the U.S. federal government is unlikely to default on its bond obligations. The federal government has the power to tax to pay off bondholders, if necessary.
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Refer to Table 7.1. Output is increasing at
A) a diminishing rate. B) an increasing rate. C) a constant rate. D) a negative rate.
According to this theory of the term structure, bonds of different maturities are not substitutes for one another
A) segmented markets theory B) expectations theory C) liquidity premium theory D) separable markets theory
If a demand curve shifts, we know that
A) the price of the good itself is not a factor. B) the price of the good itself is a factor. C) the price of the good and supply are the major factors. D) the price of the good and demand are major factors.
When price discrimination raises the price paid by some consumers without lowering the price paid by other consumers,
a. profit will fall b. total revenue is constant, but profit will rise c. total revenue will increase d. marginal cost will increase e. the firm is engaged in rent-seeking behavior