The near Collapse of Long Term Capital Management Was Caused

question 20

Multiple Choice

The near collapse of Long Term Capital Management was caused by

• A) the high management fees charged by the fund's two Nobel Prize winners.
• B) the fund's high leverage ratio of 20 to 1.
• C) a sharp decrease in the spread between corporate bonds and Treasury bonds.
• D) a sharp increase in the spread between corporate bonds and Treasury bonds.
• E) the fund's shift away from a market-neutral investment strategy.

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Definitions:

Process Cost System

An accounting system used to track and assign costs to units of product in continuous, homogenous production processes.

Manufacturing Cost Elements

The elements of production expenses, usually consisting of direct materials, direct labor, and overhead costs related to manufacturing.

Production Cost Report

A detailed account summarizing the total cost involved in producing a product or completing a production process in a specific period.

Job Cost Sheet

A form used to record the costs chargeable to a specific job and to determine the total and unit costs of the completed job.