If the Interest Rate Is R and Will Remain R

question 2

Multiple Choice

If the interest rate is r and will remain r forever, then a bond that will pay 95 dollars a year forever, starting one year from now, is worth how much today?

• A) 95/(1 + r) dollars.
• B) 95(1 + r) dollars.
• C) 95/r dollars.
• D) 95/(1 + r+r²+........+rⁿ+........) dollars.
• E) None of the above.

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Definitions:

Cost Standards

Benchmarks or predetermined costs relating to the production of goods or services, serving as a yardstick for measuring actual performance against expected costs.

Direct Material Quantity Variance

The difference between the actual quantity of direct material used and the expected quantity, multiplied by the standard cost per unit.

Actual Production

The real quantity of goods or services produced during a specific period, as opposed to planned or theoretical outputs.

Standard Costing

A management accounting method that uses standard costs for direct materials, labor, and overhead to control expenses and assess performance.