Term Structure Refers To

question 31

Multiple Choice

Term structure refers to:

• A) how interest rates vary over different structures of bonds.
• B) how interest rates vary over different structures of corporate securities.
• C) how interest rates vary over time with otherwise identical bonds.
• D) the maturity dates of a bond issue.

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Definitions:

Investor Risk Aversion

The tendency of investors to prefer lower-risk investments to avoid potential losses.

WACC

Weighted Average Cost of Capital, a calculation of a firm's cost of capital in which each category of capital is proportionately weighted.

Appropriate Discount Rate

The rate used to discount future cash flows to their present value to account for risk and time value of money, reflecting the opportunity cost of capital.

Interest Rate

The share of a loan incurred as interest costs to the borrower, habitually depicted as an annual percentage of the loan's outstanding amount.