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I Explain the effect of each of the following events, ceteris paribus. The interest rate on...

I Explain the effect of each of the following events, ceteris paribus.

  1. The interest rate on bonds prices..
  2. Several companies in the same sector announce surprisingly higher sales.
  3. A change in the tax law passed last year reduces this year’s profit.
  4. The company unexpectedly announces that due to an accounting error, it must amend last year’s accounting statement and reduce last year’s reported profit by $5 million. It also announces that this change has no implications for future profits.
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Answer #1

Ans:Interest rate has an inverse relationship with bond prices when interest rate increases, bond prices

decrease: when interest rate decreases, bond price increases.

When several companies in the same sector announce high sales, there would be high competition and some of them might incur losses.

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