12. Which of the following statements is generally true for all types of bonds?A) The longer the maturity of the bond, the greater the rate of return as a result of an increase in interestrates.B) Even though the bond has a substantial initial interest rate, its return can be negative if the interest rateincreases.C) Prices and returns of short-term bonds are more volatile than long-term bonds.D) A decrease in interest rates results in capital losses for bonds with a longer duration/tenor than theholding period.13. In the following situations, which one would you choose as a lender?A) The interest rate is 9 percent and the expected inflation rate is 7 percent.B) The interest rate is 4 percent and the expected inflation rate is 1 percent.C) The interest rate is 13 percent and the expected inflation rate is 15 percent.D) The interest rate is 25 percent and the expected inflation rate is 50 percent.14. Assuming ceteris paribus,the coupon rate of the bond,the duration of the bond.A) The higher; the longerB) The higher; the shorterC) The lower; the shorterD) the greatest; the longer

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12. Which of the following statements is generally true for all types of bonds? A) The longer the maturity of the bond, the greater the rate of return as a result of an increase in interest rates. B) Even though the bond has a substantial initial interest rate, its return can be negative if the interest rate increases. C) Prices and returns of short-term bonds are more volatile than long-term bonds.

12. Which of the following statements is generally true for all types of bonds? A) The longer the maturity of the bond, the greater the rate of return as a result of an increase in interest rates. B) Even though the bond has a substantial initial interest rate, its return can be negative if the interest rate increases. C) Prices and returns of short-term bonds are more volatile than long-term bonds.

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter13: Capital, Interest, Entrepreneurship, And Corporate Finance

Section: Chapter Questions

Problem 13PAE

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