Which of the Following Statements Is Correct

question 34

Multiple Choice

Which of the following statements is correct?

• A) The probability of default is higher on short -term bonds than on long-term bonds.
• B) Reinvestment rate risk is lower, other things held constant, on long-term than on short-term bonds.
• C) According to the market segmentation theory, the yield curve is expected to slope downward.
• D) Borrowers prefer to borrow on a short-term basis, as a result, the yield curve is downward sloping.
• E) If the inflation was expected to decrease in the future, then the yield curve would have an upward slope.

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Definitions:

Multiple-Step Income Statements

A detailed financial report that separates operating revenues and expenses from non-operating ones to calculate net income.

Income Subdivision

Income subdivision is the process of breaking down income into various categories or sections for detailed analysis and reporting.

Forecasting

The process of making predictions about future events, often involving the analysis of data and trends to inform business decisions.

Net Income Recognition

Net income recognition refers to the point at which revenues minus expenses are realized and reported in the financial statements, determining the profitability of a company for the period.