Which of the Following Security Portfolios Should Offer the Highest

question 20

Multiple Choice

Which of the following security portfolios should offer the highest maturity premium?

• A) Common stocks, because they never mature.
• B) Long-term Treasury bonds, because of potential fluctuations in interest rates.
• C) Treasury bills, because of fluctuations in inflation rates.
• D) The Dow, because it is the oldest and most stable index.

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Definitions:

Physical Flow

The actual movement of goods or materials through a manufacturing process, from receipt of raw materials to delivery of finished products.

Weighted Average Method

An inventory valuation method that applies a weighted average cost to the goods available for sale, to calculate cost of goods sold and ending inventory.

Responsibility Centre

A management accounting tool in which parts of an organization are allocated responsibility for controlling costs, revenues, or investments.

Control Purposes

Activities or measures implemented to ensure that operations are conducted as planned and resources are used efficiently.