Short-Term Bonds Are Subject to ________ Risk Because Proceeds Must

question 17

Multiple Choice

Short-term bonds are subject to ________ risk because proceeds must be put into some future asset at an unknown interest rate.

• A)reinvestment
• B)term
• C)liquidity
• D)default

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Definitions:

Acquisition Differential

The difference between the purchase price of an acquired company and the sum of its net assets' fair values.

Retained Earnings

The portion of a company's profit not distributed to shareholders as dividends but kept in the company to reinvest in its core business or to pay debt.

Cost Method

An accounting approach for investments, outlining that an investment is recorded at its acquisition cost, adjusting for any dividends received.

Deferred Tax Asset

An accounting term representing an asset that may be used to reduce any future tax liability originating from temporary timing differences between the accounting and tax treatment of transactions.