Market Segmentation Theory Explains the Typical Upward Sloping Shape of Yield

question 32

Multiple Choice

Market segmentation theory explains the typical upward sloping shape of yield curves as a function of

• A) normally greater demand for long-term bonds than for short-term notes.
• B) normally greater demand for short term notes than for long-term bonds.
• C) expectations that inflation will be higher in the future than it is now.
• D) the greater liquidity of short-term notes as compared to long-term bonds.

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Definitions:

Materials Price Variance

The difference between the actual cost of raw materials and the expected (standard) cost, used in budgeting and financial analysis to gauge purchasing efficiency.

Direct Materials

Raw materials that are directly used in the manufacturing of a product and are easily traceable to the final product.

Direct Labor Variances

The difference between the budgeted or standard cost of direct labor for actual production and the actual cost incurred for direct labor.

Direct Labor

The work of factory employees that can be directly traced to the product being manufactured.