A Financial Institution That Wishes to Reduce Its Exposure to the Possibility

question 64

Multiple Choice

A financial institution that wishes to reduce its exposure to the possibility of declining interest rates might use

• A)a long hedge.
• B)a short hedge.
• C)a day hedge.
• D)index arbitrage.

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Definitions:

Spending Variance

is the difference between the budgeted amount of expenses and the actual amount spent.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity, allowing for better performance evaluation.

Indirect Materials

Materials used in the production process but not directly traceable to a finished product, such as lubricants for machinery.

Spending Variance

The difference between the budgeted or planned amount of expense and the actual amount spent.