Which of the Following Statements Pertaining to the Yield Curve

question 6

Multiple Choice

Which of the following statements pertaining to the yield curve is not true?

• A) Yield curves usually slope upwards.
• B) The yield curve shows the difference in default risk between securities.
• C) The yield curve shows the relationship among bonds with the same risk characteristics but different maturities.
• D) The yield curve can be flat or downward sloping depending on market conditions.

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Definitions:

Cash Equivalents

Short-term, highly liquid investments that are easily convertible into known amounts of cash and so near their maturity that they present insignificant risk of changes in value.

Balance Sheet

A financial statement that presents a company's financial position at a specific point in time, showing assets, liabilities, and shareholders' equity.

Allowance for Doubtful Accounts

A contra-asset account that represents the estimated amount of accounts receivable that may not be collected.

Aging of Accounts Receivable

A method used to estimate the collectability of accounts receivable by categorizing them according to the length of time an invoice has been outstanding.