What is a bond convexity?
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Why is the substitution effect important from an empirical perspective? How does the convexity of indifference curves matter to this discussion?
With the following condition: UxxUx^2-2UxyYxUy+uyyUy^2<0, check the convexity of the indifference curves for each of the following functions and describe the precise relationship between diminishing marginal utility and quasi-concavity for each case.
A. U(x,y)=3x+y
B. U(x,y)=(x.y)^1/2
C. U(x,y)=(x)^1/2+y
D. U(x,y)=(x^2-y^2)^1/2
E. U(x,y)=(xy)/(x+y)
(^1/2 used inplace for square root)
A corporate bond has a face value of $10,000 with a bond rate of 6%. The interest of the bond will be paid quarterly. The bond will mature in 10 years. If the bond is sold at $7,000 on the market, what is the yield (return) on the bond?