Which of the Following Best Explains Why the Long-Term Interest

question 7

Multiple Choice

Which of the following best explains why the long-term interest rate will generally change by less than 1% when the short-term interest rate changes by 1%?

• A)the mathematical calculations are more difficult for analysts in the case of long-term bonds.
• B)long-term rates are always lower than short-term rates,so there is less room for them to change.
• C)financial market participants will not expect this increase in the short-term interest rate to persist fully in the future.
• D)financial markets are often affected by bubbles and fads.
• E)none of the above

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Definitions:

Over Time Cost

The additional expenses incurred when employees work beyond their regular hours, often including higher wage rates for overtime hours.

Marginal Subcontracting Cost

The additional cost incurred for each unit produced or service provided when a company resorts to subcontracting as opposed to in-house production.

Layoff Cost

Expenses associated with terminating employees, including severance pay and benefits continuation.

Hiring And Training Cost

The total expenses involved in recruiting new employees and providing them with the necessary training to perform their job roles effectively.