Which of the Following Is the Most Reliable Means of Distinguishing

question 14

Multiple Choice

Which of the following is the most reliable means of distinguishing a trust relationship from an agency relationship for purposes of deciding which type of fiduciary fund should be used?

• A) Examine the applicable documents and contact the GASB for a determination letter.
• B) Examine the aggregate of factors, such as the enactment that brought the relationship into existence and regulations under which it operates.
• C) Examine the length of time assets will be held; agency relationships are generally in existence longer than trust relationships.
• D) Examine the wording of any agreements to determine if the word "trust" or "agency" is used.

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Definitions:

Fisher Formula

An equation used in economics and finance that describes the relationship between nominal interest rates, real interest rates, and the inflation rate.

Real Rate

is the interest rate adjusted for inflation, reflecting the true cost of borrowing or real yield on an investment.

Interest Rate Risk

The potential for investment value fluctuations due to changes in the prevailing interest rates.

Maturity

The specified time at which the principal amount of a bond, loan, or other financial instrument is due to be paid in full.