Which of the Following Statements Is CORRECT

question 76

Multiple Choice

Which of the following statements is CORRECT?

• A) Downward sloping yield curves are inconsistent with the expectations theory.
• B) The actual shape of the yield curve depends only on expectations about future inflation.
• C) If the pure expectations theory is correct,a downward sloping yield curve indicates that interest rates are expected to decline in the future.
• D) If the yield curve is upward sloping,the maturity risk premium must be positive and the inflation rate must be zero.
• E) Yield curves must be either upward or downward sloping - they cannot first rise and then decline.

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Definitions:

Fixed Overhead Volume Variance

The difference between the budgeted and actual fixed overhead costs, attributed to the variance in the volume of production.

Fixed Component

A cost or part of a cost that remains unchanged regardless of changes in the level of output or activity.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual products or job orders based on a specific activity measure, like labor hours or machine hours.

Machine-Hours

A measure of production activity that quantifies the number of hours machines are operated in the production process.