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Please help with financial question?
1. Some analysts believe that the term structure of interest rates is determined by the behavior of various types of financial institutions. This theory is called the
a) expectations hypothesis.
b)segmentation theory.
c)liquidity premium theory.
d)theory of industry supply and demand for bonds.
2. A corporation's board of directors:
a) is selected by and can be removed by management.
b)can be voted out of power by the shareholders.
c)has a lifetime appointment to the board.
d)is selected by a vote of all corporate stakeholders
3. In general, the larger the portion of a firm's sales that are on credit, the
a) lower will be the firm's need to borrow.
b) higher will be the firm's need to borrow.
c) more rapidly credit sales will be paid off.
d) more the firm can buy raw materials on credit.
1 Answer
- csandaLv 61 decade agoFavorite Answer
1) d. It's not a because that has to do with inflation. It's not b because that had to do with long rates vs. short term rates. It's not c because liquidity premium only has to do with a portion of overall interest rates. It's d because supply/demand determines interest rates.
2) b. BoD is not selected by management or all stakeholders (bond holders don't get a vote), but equity shareholders. It is usually for a finite time period, whereupon directors need to get reelected.
3) b. If you are giving more credit, you are not collecting cash. Meanwhile, you are paying for the inventory so you need to finance it. Thus a and c are not it. It is also not d because your sales terms have nothing to do with the terms you get from your vendors.