Which of the Following Statements Is CORRECT

question 67

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 rate risk is lower, other things held constant, on long-term than on short-term bonds.

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Definitions:

Accounts Payable

Liabilities or amounts owed by a business to its creditors or suppliers for goods or services that have been received but not yet paid for.

T Account

The simplest form of an account, which consists of an account title, a debit side, and a credit side.

Debit

An accounting entry that increases an asset or expense account, or decreases a liability or equity account. It is positioned on the left side in accounting records.

Credit

Credit refers to the trust which allows one party to provide resources (money, goods, services) to another party wherein the second party does not reimburse the first party immediately but promises to return or repay those resources (with or without interest) at a later date.