Question

Means of change y ou 1) What is the real will the band wa esta bond that 15 per year? s s) b) -8% 17) According to Say's Law, total output is a function of a) Labor; Utility b) Utility: Capital e) Technology: Capital d) Labor: Capital 18) When hond investors take Interest Rate Risk into consideration before purchasing bonds, they generally find that this risk tends to _when market interest rates are higher, Whe bond investors take Duration Risk into consideration before purchasing bonds, they generally find that this risk tends to as bonds are held for a longer period of time. a) increase; increase b) decrease; decrease c) increase; decrease d) decrease; increase 79) Which of the following interest rates equates the present value of payments received bond with its market price today? ) The discount rate. The current yield. More Edit

Answer 1

15. Answer is (b).

Money serves as a medium of exchange as we exchange goods and services through money and it is generally accepted in all transactions. It also serves as a store of value as wealth can be stored in terms of money for future. It is also a unit of account in which value of all goods and services is measured.Thus record of deposit is not a function of money

16. Answer is (b) real interest rate in bond will be yield- inflation rate i.e 7%- 15% = -8%. Real interest rate takes inflation into account and gives the real rate of interest in bond.

17.Answer is (d) labour,capital. as labour will be employed to produce goods and capital will also be invested for the production of goods which will give the total output.

18. Answer is (a) . The risk for an investor increases when there is an increase in market interest rate as the bond of investor would be available at a high interest rate and it would become difficult for the investor to find a buyer who can pay the par value of bond. The greater the duration of the bond the greater is the interest rate risk. If you sell the bond before maturity the price will be affected by prevailing interest rate and duration.

19. Answer is (a) discount rate. It is the yield to maturity which equals the present value of promised cash flows to the current market price or purchase price.

It cannot be option b because current yield measures the rate of return on a bond if it is purchased at its current market price and if coupon interest is received.