The Finance Officer of a Small City Has Heard That

question 45

Essay

The finance officer of a small city has heard that certain items of cost may be allowable under federal grants, even though they were not incurred specifically for the grant. To what source could the finance officer go to determine what costs are allowable under federal grants? Why do you think the federal government specifies the allowability of costs?

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Definitions:

Bond Prices

The market value of a bond, which inversely changes with interest rates.

Subordinated Debt

Debt with a lower priority for the payment of interest and principal than other (senior) debt.

Senior Debt

Senior debt is a loan or bond that takes priority over other unsecured or junior debt owed by the issuer.

Convertible

A type of financial security, such as a bond or preferred stock, that can be converted into a specified amount of another type, typically common stock, at the holder's option.