Self liquidating paper theory

A firm will usually increase the ratio of short-term debt to long-term debt when A. no general relationship between short- and long-term rates. intermediate rates (one to five years) lower than both short-term and long-term rates. the relationship between short- and long-term rates remains unchanged.

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government securities are used to construct yield curves because A.

the working capital associated with a product will be liquidated within a one-year period. all the product will be sold, receivables collected, and bills paid over the time period specified. assets associated with the production of a product will be liquidated over the depreciable life of the assets. self-liquidating assets will be financed by long-term sources of capital.

The concept of a self-liquidating asset implies that A.

the large number of maturities form a continuous curve. they are free of default risk and the large number of maturities form a continuous curve. None of the options As the economy moves through a business cycle, which of the following “term structure of interest rates” theories dominates the shape of the yield curve.

Some analysts believe that the term structure of interest rates is determined by the behavior of various types of financial institutions.

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