If Three-Year Securities Are Yielding 6% and Two-Year Securities Are

question 37

Multiple Choice

If three-year securities are yielding 6% and two-year securities are yielding 5.5%, future short-term rates are expected to ______, and outstanding security prices are expected to ______.

• A) fall; fall.
• B) rise; fall.
• C) fall; rise.
• D) rise; rise

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Definitions:

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the standard cost allocated to production, based on the actual hours worked.

Machine-Hours

A measure of production time, calculated by the number of hours machines are operating in the manufacturing process.

Budget Variance

The difference between budgeted figures and actual figures for a particular accounting category.

Volume Variance

The difference between the expected and actual sales volumes, impacting revenue and expenses.