According to the Liquidity Premium Theory of the Term Structure

question 76

Multiple Choice

According to the liquidity premium theory of the term structure

• A)because buyers of bonds may prefer bonds of one maturity over another,interest rates on bonds of different maturities do not move together over time.
• B)the interest rate on long-term bonds will equal an average of short-term interest rates that people expect to occur over the life of the long-term bonds plus a term premium.
• C)because of the positive term premium,the yield curve will not be observed to be downward sloping.
• D)the interest rate for each maturity bond is determined by supply and demand for that maturity bond.

---

Definitions:

Transferred-in Costs

Costs that have been incurred in one department and are carried forward to a subsequent department for further processing.

Product's Cost

The total expense incurred to create a product, encompassing materials, labor, and overhead costs.

Job Order Cost System

An accounting method used to accumulate costs related to a specific job or order, tracking direct materials, direct labor, and overhead applied to that job.

First-in, First-out Method

An inventory valuation method that assumes the first items purchased or produced are the first ones sold, affecting the cost of goods sold and remaining inventory.