Author Question: Suppose that a bond promises to pay its holder 100 a year forever. If the price of the bond ... (Read 109 times)

jman1234 · **on:** Jun 29, 2018

Suppose that a bond promises to pay its holder 100 a year forever. If the price of the bond increases from 1,000 to 1,250, then the interest rate on the bond

A) falls from 10 percent to 8 percent.
B) rises from 8 percent to 10 percent.
C) does not change because it is not affected by the price of the bond.
D) falls from 10 percent to 6 percent.

Question 2

Suppose a country is producing 20 million of real GDP. If the economy grows at 10 percent per year, approximately how many years will to take for real GDP to grow to 80 million?

A) 14
B) 7
C) 4
D) 30