A Bond with a R100 Annual Interest Payment and R1,000

question 13

True/False

A bond with a R100 annual interest payment and R1,000 face value with five years to maturity (not expected to default) would sell for a premium if interest rates were below 9% and would sell for a discount if interest rates were greater than 11%.

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Definitions:

Fixed Overhead

Regular, consistent costs incurred by a business that are not affected by the level of goods or services produced, such as rent and salaries.

Budget Variance

The difference between the budgeted or planned amount of expenses or revenues, and the actual amount incurred or earned.

Predetermined Overhead Rate

A rate calculated before the period begins, used to allocate manufacturing overhead to products based on a specific activity base.

Volume Variance

The difference between planned production volumes and actual production volumes, and its effect on budgeted costs.