Which of the Following Statements Regarding Long-Term Supply Contracts Is

question 37

Multiple Choice

Which of the following statements regarding long-term supply contracts is false?

• A) The market value of the contract at any point in time may not be easy to determine, making it difficult to track gains and losses.
• B) Long-term supply contracts are designed to eliminate credit risk.
• C) Long-term supply contracts insulate the firms from commodity price risk.
• D) Long-term supply contracts are bilateral contracts negotiated by a buyer and a seller.

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Definitions:

Coupon Rate

The percentage of interest returned by a bond annually, measured against its face value.

Yield To Maturity

Yield to maturity is the total return anticipated on a bond if it is held until its maturity date, including all interest payments and the repayment of principal.

Coupon Rate

Yearly interest payment on a bond, specified as a percentage of its listed value.

Bond Prices

Bond prices are the market value of bonds, which can fluctuate based on interest rate changes, credit risk, and other factors.