A Government Has a Principal and Interest Payment on Long-Term

question 23

Multiple Choice

A government has a principal and interest payment on long-term debt coming due in the next fiscal year. Which condition must hold true for the government to treat the payment as an expenditure in the current fiscal year?

• A) The payment must come due in the first month of the next fiscal year, and the government must transfer the cash for the payment to the debt service fund consistently from year-to-year.
• B) The payment comes due in the first 60 days of the next fiscal year, and the government must transfer the cash for the payment to the debt service fund consistently from year-to-year.
• C) The payment must come due in the first 60 days of the next fiscal year, but the government has some flexibility on when the cash for the payment is transferred to the debt service fund.
• D) The payment can come due at any time, and the government can make the payments from the General Fund so long as the resources are available at the time of the payment.

---

Definitions:

Revenue Announcement

Revenue announcement refers to a company publicly disclosing its revenue figures for a specific period, which can impact its stock price and investor perception.

Informationally Efficient

A market characteristic where prices fully reflect all available information, making it impossible to consistently achieve higher returns.

Random Walk

A theory suggesting that stock market prices evolve according to a random path and are therefore unpredictable.

Stock Prices

The cost of purchasing a share of a company, reflecting the market's valuation of that company.