Your Uncle Would Like to Restrict His Interest Rate Risk

question 58

Multiple Choice

Your uncle would like to restrict his interest rate risk and his default risk,but he still would like to invest in corporate bonds.Which of the possible bonds listed below best satisfies your uncle's criteria?

• A) AAA bond with 10 years to maturity.
• B) BBB perpetual bond.
• C) BBB bond with 10 years to maturity.
• D) AAA bond with 5 years to maturity.
• E) BBB bond with 5 years to maturity.

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Definitions:

Special Cost Pool

A financial management term for aggregating specific costs together, typically for reporting or reimbursement purposes.

ABC System

An approach in accounting that allocates overhead and indirect costs to specific activities related to the production of a product or service.

Allocating Costs

The process of assigning indirect expenses to different departments, products, or projects based on relevant criteria.

Measure Of Activity

A parameter or unit used to quantify the level of operational or production activity within a specific period.