Lower Interest Rates Increase the Present Value of All Projected

question 10

True/False

Lower interest rates increase the present value of all projected cash flows from a loan-backed security resulting in a rise in its market value.

---

Definitions:

Manufacturing Margin

The excess of sales over variable cost of goods sold.

Contribution Margin

The amount by which sales revenue exceeds variable costs, contributing towards covering fixed costs and generating profit.

Variable Factory Overhead

Costs that vary with the volume of production and include expenses such as indirect materials and utilities.

Absorption Costing

An accounting method that includes all direct costs and overhead expenses related to the production of a product in its cost base.