When the Russian Government Defaulted on Its Bonds in August

question 49

Multiple Choice

When the Russian government defaulted on its bonds in August 1998:

• A) risk spreads decreased significantly.
• B) yields on U.S. Treasury securities fell while yields on corporate bonds rose.
• C) yields on U.S. Treasury securities rose while prices of corporate bonds rose.
• D) risk spreads did not change.

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Definitions:

Monthly Production Volume

The quantity of goods or products manufactured or produced in a factory or plant over the course of a month.

Fixed Manufacturing Cost

Expenses that do not change with the level of production, such as rent, salaries, and insurance, required to operate a manufacturing facility.

Mixed Cost

A cost that contains both variable and fixed cost elements; it changes with the level of activity but not in direct proportion.

Least-squares Regression

A statistical method used to determine the line of best fit by minimizing the squares of the differences between observed and predicted values.