Continuing with the same vacation-insurance company from the preceding question, what vacation-day price(s) would be acceptable to both the family and the insurance company?

Firms that issue callable bonds have the option of repaying the principal to the bond buyers before the stated maturity date for the bonds. Firms may call their bonds before maturity in order to avoid making some of the coupon payments

Should we expect the price of a callable bond to be higher or lower than the price of a non-callable bond that has the same coupon payment, principal, and effective yield? A) Price of the callable bond should be higher B) Price of the bonds should be the same C) Price of the callable bond should be lower D) We need to know the year in which the bond is called in order to compare the prices

Which of the following would cause the real interest rate to be negative?

a. When the nominal interest rate is greater than the inflation rate b. When the nominal interest rate is greater than the rate of deflation c. When the nominal interest rate is smaller than the rate of deflation d. When the nominal interest rate is smaller than the inflation rate e. When the nominal interest rate is equal to the inflation rate