Which of the Following Statements Is FALSE

question 27

Multiple Choice

Which of the following statements is FALSE?

• A)As interest rates change,the market values of the securities and cash flows in the portfolio change as well,which in turn alters the weights used when computing the duration as the value-weighted average maturity.
• B)The duration of a portfolio of investments is the simple average of the durations of each investment in the portfolio.
• C)Adjusting a portfolio to make its duration neutral is sometimes referred to as immunizing the portfolio,a term that indicates it is being protected against interest rate changes.
• D)When the durations of a firm's assets and liabilities are significantly different,the firm has a duration mismatch.

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Definitions:

Direct Materials

Raw materials that can be directly traced to the production of a specific product, a component of the total manufacturing cost.

Variances

Differences between planned or expected financial outcomes and the actual results.

Standard Direct Materials

The budgeted cost for direct materials which are the raw materials that can be directly attributed to the production of goods, used for budgeting and performance evaluation.

Actual Materials Price

The real cost incurred to acquire materials used in the production process, as opposed to the budgeted or standard cost.