The Two Interconnected Concepts That Lie at the Heart of Many

question 90

Multiple Choice

The two interconnected concepts that lie at the heart of many financial crises are:

• A) rational expectations and leverage.
• B) irrational expectations and forecasting.
• C) forecasting and leverage.
• D) irrational expectations and leverage.

Understand and calculate variable overhead efficiency variance.

Prepare flexible budgets for different activity levels and understand its components.

Calculate standard variable overhead rates.

Construct planning budgets and understand the influence of activity levels on budgeted amounts.

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Definitions:

Par Value

Is the face value of a bond or stock, representing the amount that will be returned to the investor at maturity or the value at which the stock is noted on the balance sheet.

Default Risk Premiums

The additional yield that investors demand for holding a bond that has a risk of default over a risk-free security.

Treasury Bond

A long-term, interest-bearing security issued by the government, with a maturity period typically longer than ten years.