The Numbers Provided Are in Millions of Dollars and Reflect

question 76

Multiple Choice

The numbers provided are in millions of dollars and reflect market values:
-The short-term debt consists of 4-year bonds paying an annual coupon of 4 percent and selling at par.What is the duration of the short-term debt?

• A)3.28 years
• B)3.53 years
• C)3.78 years.
• D)4.03 years.

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Definitions:

Sunk Costs

Costs that have already been incurred and cannot be recovered, and thus should not affect future economic decisions.

Average Fixed Cost

Is the fixed costs of production (costs that do not change with the level of output) divided by the quantity of output produced.

Marginal Cost

The cost associated with producing one additional unit of a product, which can vary depending on the level of production.

Output

The amount of goods or services produced by a person, machine, business, or industry.