Quiz Ch 03 – T/F Relationship between Short-Term and Long-Term Interest Rates
Principles of Corporate Finance
Brealey, Myers, and Allen
13th Edition
True or false: Short-term and long-term interest rates always exhibit synchronized movements.
True or false: Short-term and long-term interest rates always exhibit synchronized movements.
True or false: Is the primary significance of the annual report in finance attributed to its use by investors for shaping expectations regarding a firm’s future earnings, dividends, and the associated risk of cash flows?
True or false: Spot rates for the long term generally exceed those for the short term.
True or false: Assets can be classified into either tangible or intangible categories.
True or false: The interest and dividends paid by a corporation are eligible for deduction as operating expenses, resulting in a reduction of the company’s tax liability.
True or false: The exclusion of 70% of interest income from taxable income for corporations acts as an incentive for companies to utilize more debt financing than they would without this provision in the tax law.
True or false: The term structure of interest rates defines how yield to maturity is related to the maturity of a bond.
True or false: U.S. Treasury bonds entail negligible default risk while being exposed to inflation risk.
True or false: In the realm of U.S. Treasury offerings, inflation-indexed bonds are issued and referred to as TIPS.
True or false: The value of an asset corresponds to the present value of the anticipated cash flows it will yield, and a business’s capacity to offer cash flows to its investors is its free cash flow, thereby substantiating the significance of FCF in finance.