Which of the Following Is NOT a Valid Restriction or Deficiency

question 1

Multiple Choice

Which of the following is NOT a valid restriction or deficiency of the bootstrap method of estimating the discount function?

• A)The method requires that all bonds have cashflows on the same dates.
• B)If bond cash flows are written as arrays (i.e. ,as \(\left( c _ { 1 } , c _ { 2 } , \ldots \right)\)
• On the chosen dates
• \(t _ { 1 } , t _ { 2 } , \ldots\),the method requires that the cash flow arrays of bonds used in estimating the discount function be linearly dependent.
• C)It requires choosing specific bonds on each date and is sensitive to the choice of bonds.
• D)After bootstrapping,It is difficult to value bonds that have cashflows on dates that are in between discount function maturities.

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Definitions:

Equivalent Units

A concept in cost accounting used to allocate costs evenly in processes where incomplete units complicate direct measurement.

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A specialized department within a manufacturing facility where components are assembled into final products.

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A measure used in the costing of products in process, which converts partially completed goods into an equivalent number of fully completed units.

Weighted-average

A mathematical calculation that takes into account the varying degrees of importance of the numbers in a data set, assigning more weight to some numbers than others.