Suppose you have two investments to choose from:
1, A one-year $20,000 zero coupon bond
2, A two-year $20,000 zero coupon bond
What is the difference between the prices of these bonds if the interest rate rises from 4% to 5%?
A) You would lose $167.39 more on the two year bond.
B) You would lose $167.39 more on the one year bond.
C) You would gain $350.54 more on the two year bond.
D) You would lose $183.15 more on the one year bond.
A
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What takes place in the indirect finance market?
A) Corporate and government bonds are sold to savers. B) Government purchases of buildings and equipment are sold to the highest bidder. C) Part ownership of corporations is sold in the form of stocks. D) Deposits of savers are accepted and lent to borrowers.
If the fraction of U.S. government securities held by foreigners increases, _____
a. current consumption by U.S. citizens can decrease b. current consumption by U.S. citizens can increase c. current interest payments will increase d. private investments will increase e. the burden of debt on future generations will decrease