Assume a Firm Is Run as a Zero-Profit Enterprise

question 88

Multiple Choice

Assume a firm is run as a zero-profit enterprise.Which of the following would be TRUE?

• A) There is a higher probability that wage reductions would outweigh layoffs.
• B) Those in charge would not act any different than regular owners, there would still be layoffs.
• C) Those not in charge would remain risk neutral.
• D) Wage reductions would be lower than they would be if the firm was run for profit.

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Definitions:

Yield Curve

A graph of yield to maturity as a function of time to maturity.

Immunization

A strategy in fixed-income portfolio management to shield the portfolio's value from interest rate movements.

Duration

A measure of the sensitivity of the price of a bond or other fixed-income investment to changes in interest rates, often used to assess risk.

Interest-Rate Change

A fluctuation in the cost of borrowing or the return on savings, which can significantly impact financial markets and economic conditions.