The Importance of the Reinvestment Assumption Increases with a ____

question 29

Multiple Choice

The importance of the reinvestment assumption increases with a ____ coupon and a ____ term to maturity.

• A) low, short
• B) low, long
• C) high, short
• D) high, long
• E) zero, very long

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Definitions:

Scrap Value

The estimated value at which an asset can be sold after it is no longer useful for production, generally at the end of its depreciable life.

Units-Of-Production Method

A depreciation method that allocates the cost of an asset over its useful life based on the number of units it produces.

Scrap Value

Scrap Value is the estimated residual value of an asset at the end of its useful life, representing what can be recovered from selling the asset as scrap or for parts.

Straight-Line Method

A method of calculating depreciation of an asset where the expense is evenly distributed over its useful life.