The Term Structure of Interest Rates Is

question 73

Multiple Choice

The term structure of interest rates is:

• A) Based on zero-coupon corporate bonds.
• B) A relationship between time to maturity and bond quality.
• C) Equivalent to the yield curve.
• D) Based on default-free, pure discount bonds.
• E) None of the above.

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Definitions:

Shut-down Point

The level of operation at which a firm's total revenue is equal to its total variable costs, below which it is more beneficial for a firm to cease production.

Average Variable Cost

The variable cost (cost that changes with production volume) divided by the quantity of output produced.

Profit-maximizing

Refers to the process by which a company determines the price and output level that returns the greatest profit.

MR = MC

An economic principle stating that optimal production level is reached when marginal revenue equals marginal cost.