If the Forward Rate Curve Is Downward Sloping, Then

question 23

Multiple Choice

If the forward rate curve is downward sloping, then

• A) The zero-coupon curve will lie above the yield curve.
• B) The zero-coupon curve will lie below the yield curve.
• C) The zero-coupon curve will lie above the yield curve in the near maturities and then lie below the yield curve for later maturities.
• D) Not enough information to be able to answer the question.

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Definitions:

Net Realizable Value

The expected selling price in the ordinary course of business minus the estimated costs of completion and the costs necessary to make the sale.

Normal Selling Price

The standard amount charged to customers for a good or service under normal market conditions.

Beginning Inventory

The value of goods available for sale at the start of an accounting period, before any purchases or sales have occurred.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from total revenue.