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:

Weighted-Average Method

An inventory costing method that calculates the cost of ending inventory and the cost of goods sold based on the average cost of all units available for sale during the period.

Equivalent Units

A concept in cost accounting that converts partially completed goods into a number of completed units for inventory valuation.

Materials

Raw inputs or supplies that are converted into finished products through the manufacturing process.

FIFO Method

"First In, First Out", an inventory valuation method where the first items placed into inventory are the first sold, affecting the cost of goods sold and inventory value.