In the Early 1980s, When a Recession Raised Concern About

question 50

Multiple Choice

In the early 1980s, when a recession raised concern about corporations' ability to repay debt, there was a dramatic increase in

• A)the yield on medium-quality corporate bonds relative to the yield on long-term Treasury securities.
• B)the yield on long-term Treasury securities relative to the yield on medium-quality corporate bonds.
• C)the yield on six-month T-bills relative to the yield on long-term Treasury securities.
• D)the yield on interest-earning checking deposits in commercial banks relative to the yield on six-month T-bills.

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Definitions:

Long-term Investments

Assets held as investments that a company intends to hold for more than one accounting period.

Plant Assets

Long-term tangible assets used in the production process, including machinery, buildings, and equipment, which are subject to depreciation.

Current Ratio

A financial metric assessing a firm’s capacity to settle its current liabilities using its current assets.

Debts

Money that is owed or due to be paid to another entity.