Which of the Following Statements Is CORRECT

question 49

Multiple Choice

Which of the following statements is CORRECT?

• A) If the maturity risk premium were zero and interest rates were expected to decrease in the future,then the yield curve for U.S.Treasury securities would,other things held constant,have an upward slope.
• B) Liquidity premiums are generally higher on Treasury than corporate bonds.
• C) The maturity premiums embedded in the interest rates on U.S.Treasury securities are due primarily to the fact that the probability of default is higher on long-term bonds than on short-term bonds.
• D) Default risk premiums are generally lower on corporate than on Treasury bonds.
• E) Reinvestment risk is lower,other things held constant,on long-term than on short-term bonds.

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Definitions:

Predetermined Overhead Rate

A rate calculated before the accounting period begins, used to apply manufacturing overhead costs to products based on a specific activity base.

Machine-Hours

An assessment of manufacturing productivity or performance, determined by the duration for which machinery is active in the production cycle.

Unit Product Cost

The total cost associated with producing one unit of product, calculated by dividing total production costs by the number of units produced.

Predetermined Overhead Rate

A rate used to allocate estimated overhead costs to individual products or job orders based on a pre-selected cost driver.