Saskatchewan Wheat Fields Inc

question 45

Multiple Choice

Saskatchewan Wheat Fields Inc.is planning to issue $100 million of commercial paper with 30 days to maturity.There is a 1% probability that the firm will default on the issue and the investor will receive zero.The investor's required rate of return is 5%.If the firm wishes to issue the commercial paper at par, the promised yield must be:

• A)5%
• B)8.25%
• C)17.17%
• D)42.27%

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Definitions:

Ideal Standards

Theoretical cost benchmarks assuming perfect operating conditions, used for planning and control.

Standard Cost System

An accounting method that applies predetermined costs to production and inventory rather than historical costs, to help managers control costs.

Direct Materials

These are specified components that can be easily identified and measured as part of the cost of creating a product or service.

Normal Standards

Performance benchmarks or criteria that are established based on average or anticipated conditions for the purpose of budgeting and cost control.