Which statement among the following is accurate ?
Show answer Hide answer
Answer: B. Government bonds pay less interest than comparable corporate bounds
Explanation
Government bonds carry minimal default risk compared to corporate bonds issued by firms. Consequently, investors demand lower interest rates on government debt than corporate debt. Risk premiums explain the yield differential between comparable government and corporate bonds. Bonds represent fixed-income debt securities issued to raise capital for entities. Credit rating agencies evaluate issuer default probabilities before establishing bond yields. Government securities serve as risk-free benchmarks within broader financial market analyses.
Investors balance risk and return by choosing between government and corporate bonds. Corporate bond markets finance business expansions, research, and capital asset investments. Retirement portfolios utilize government bonds to secure stable, predictable income streams. Long-term bonds typically pay higher interest rates than short-term bonds due to term premiums. Mutual funds reduce risk through diversification compared to holding single volatile stocks. A stock index tracks market performance rather than functioning as a physical directory.
Related questions
Q1. Which statement regarding low-income countries is accurate ?
Show answer Hide answer
Answer: B. the average agriculture family produces surplus large enough only to supply small non-agriculture population
Low-income countries rely heavily on subsistence agriculture with limited mechanization and low productivity. Traditional farming methods generate only a modest marketable surplus to feed urban populations. Agricultural...
Q2. Which of the following is incorrect regarding jobless individuals in LDCs ?
Show answer Hide answer
Answer: C. World-wide there are fewer unemployed females than males, but the rate is higher for women
Global labor market data generally shows that female unemployment rates tend to be higher than male rates even if total counts vary.
Q3. Which of the statements below concerning prejudice is correct ?
Show answer Hide answer
Answer: B. Discrimination can only persist in a competitive labour market it customers are willing to pay to maintain the discriminatory practice or the government requires discrimination
Economic theory shows that competitive market forces penalize discriminatory business practices. Discrimination persists only when sustained by government mandates or consumer preferences. Firms engaging in taste-based d...
Q4. Which of the following statements can be classified as normative ?
Show answer Hide answer
Answer: C. The unemployment rate should be lower
Normative statements express value judgments about what economic outcomes ought to be. Asserting that unemployment should be lower reflects personal policy preferences and ethics. This subjective evaluation contrasts sha...
Q5. Which of the following assertions about the foreign currency exchange market is correct ?
Show answer Hide answer
Answer: B. An increase in Pakistan’s net exports increase the demand for rupees and the rupees appreciates
Higher net exports mean foreign buyers purchase more domestic goods and services. Increased export demand requires foreign buyers to acquire domestic currency in foreign exchange markets. Rising demand for the domestic c...
Q6. What happens when a tax is levied on a product ?
Show answer Hide answer
Answer: D. an increase in the price buyers pay a decrease in the price sellers receive and a decrease in the quantity sold
A tax drives a wedge between prices buyers pay and prices sellers receive. Consumers face higher purchase prices while producers receive lower net revenues. This price divergence reduces the overall equilibrium quantity...