The Advantage of Extending Credit to Customers Is That It

question 63

Multiple Choice

The advantage of extending credit to customers is that it helps customers to buy products and services,thereby increasing the seller's revenue.The disadvantages of extending credit are costs related to:

• A)increased sales.
• B)bad debt expense.
• C)increased notes receivable.
• D)marketing.

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Definitions:

Substitution Swap

A Substitution Swap is a strategy in fixed-income markets where an investor exchanges one bond for another with similar features but more attractive terms.

Interest Rate Risk

The risk of losing value in an investment due to a change in interest rates, affecting both bonds and loans.

Long-Duration Bonds

Bonds with a longer time until maturity, typically more than 10 years, making them more sensitive to changes in interest rates.

Duration Rule

A principle that estimates the sensitivity of a bond's price to changes in interest rates, calculated as the weighted average time until a bond's cash flows are received.