Everything Else Held Constant,if the Federal Government Were to Guarantee

question 46

Multiple Choice

Everything else held constant,if the federal government were to guarantee today that it will pay creditors if a corporation goes bankrupt in the future,the interest rate on corporate bonds will ________ and the interest rate on Treasury securities will ________.

• A)increase;increase
• B)increase;decrease
• C)decrease;increase
• D)decrease;decrease

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Definitions:

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board (IASB) that companies use for financial reporting.

GAAP

General Accepted Accounting Principles, which are a set of accounting standards and procedures used in the US to ensure consistency in financial reporting.

U.S. Standards

Guidelines or norms established in the United States for various activities or products, often referring to quality and safety criteria.

Principles-Based

An approach focusing on underlying principles as opposed to strict compliance with detailed rules, often used in regulation and accounting.