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c .) I'
--~. Suppose your im·es tment advisor offers you a choice of two \·cry similar perpN11iries. A and
B, \\'hich he states have identical yields to maturity . Howeyer. you observe that the price for
security A is ~ubstantially higher than that or B. This must imply that: A has g reater default risk than B
b l A's coupon is greater than 13's
c.) B's coupon is grc<Jter than 1 's
d l the bond market is inefficient
a ) 24. ln the three sector consumption-only model. a decline in incomes in both periods for all
agents will cause lenders to demand
bonds. borrowers to s upply
a nd the price level to __ _ _ __
a.) more. more. fall h ) less. less. rise
c ) more, less. rise
d .) less . less. remain constant 25. In the three-sector model with consumption alone. an increase in second-period income (first
period income constant) for all agents will cause the supply of bonds to _
equilibrium interest rate to <J nd the price level to _ _ _ rise, rise, change amb iguously
fall, rise, change ambiguously
c. l rise, rise. rise
d l fall....
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This note was uploaded on 01/19/2014 for the course ECON 345 taught by Professor Sumaila during the Winter '09 term at The University of British Columbia.
- Winter '09