Which ONE of the Following Statements Is True

question 20

Multiple Choice

Which ONE of the following statements is true?

• A) The longer the maturity of a security, the greater its interest rate risk.
• B) If investors believe inflation will be subsiding in the future, the prevailing yield will be upward sloping.
• C) The real rate of interest varies with the business cycle, with the lowest rates seen at the end of a period of business expansion and the lowest at the bottom of a recession.
• D) The interest risk premium always adds a downward bias to the slope of the yield curve.

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Definitions:

Total Wages

The sum of all wages paid to employees by an employer over a specific period, reflecting the labor cost in production or services.

Labor Union

An organization of workers formed to protect and advance their rights and interests.

Monopoly Power

The ability of a firm to influence or control the price and production of a good or service due to the lack of viable competition.

Major League Baseball

A professional baseball organization consisting of teams that play in the American League and the National League.