Bond Theorem Applications
What are Bond Theorem Applications and also write down its consequences?
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Bond Theorem Applications:
• When rates are expected to rise, a portfolio manager must avoid investing in long-term securities. The portfolio could view an important decline in value.
• When you are an investor and you predict interest rates to refuse, you might well want to invest in long-term zero coupon bonds. Since interest rates decline, the price of long-term zero coupon bonds will raise more than that of any other kind of bond.
If demand for good falls due to increase in its own price. Then what is the change in demand termed? Answer: Contraction of demand
Budget line: This refers to all combinations of goods that a consumer can purchase with his whole income and price of two goods.
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