Bond Market Indexes Can Be Difficult to Construct Because

question 62

Multiple Choice

Bond market indexes can be difficult to construct because

• A) they cannot be based on firms'market values.
• B) bonds tend to trade infrequently, making price information difficult to obtain.
• C) there are so many different kinds of bonds.
• D) prices cannot be obtained for companies that operate in emerging markets.
• E) corporations are not required to disclose the details of their bond issues. Bond trading is often "thin," making prices stale (or not current).

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Definitions:

Degree of Operating Leverage

A financial ratio that measures the percentage change in operating income in response to a percentage change in sales.

Forecasted Contribution Margin

An estimated metric that indicates the difference between sales revenue and variable costs of goods sold, used to predict the profitability of sales.

Contribution Margin

The difference between sales revenue and variable costs, used to cover fixed costs and to generate profit.

Contribution Margin

The selling price per unit, minus the variable cost per unit, indicating how much each unit contributes to covering fixed costs and generating profit.