The Term "Compensating Differential" Refers to

question 79

Multiple Choice

The term "compensating differential" refers to

• A) the fact that workers who do similar work should be paid the same wage.
• B) the fact that some workers live further from their jobs than do other workers.
• C) a wage difference that is distinguishable on the basis of monetary characteristics.
• D) a wage difference that arises from nonmonetary characteristics of different jobs.

Understand the concepts of bond stripping, reconstitution, and their implications for arbitrage opportunities.

Grasp the expectations theory and its implications for the term structure of interest rates.

Analyze the relationships between yield to maturity, coupon rates, and bond prices.

Understand the concept of liquidity premiums and their effect on yield curves.

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