Current Financial Accounting Standards Require

question 15

Multiple Choice

Current financial accounting standards require

• A) the use of the fair value method,but not the intrinsic value method.
• B) the use of the fair value method and the intrinsic value method to account for each plan.
• C) disclosure in the notes to the financial statements of compensation expense under the fair value method if the intrinsic value method is used.
• D) disclosure in the notes to the financial statements of compensation expense under the intrinsic value method if the fair value method is used.

---

Definitions:

Modified Duration

A measure of the sensitivity of a bond's price to changes in interest rates, specifically reflecting how much the duration changes for a 1% change in yield.

Macaulay Duration

A measure of the weighted average time until a bond or fixed income portfolio's cash flows are received, used to gauge interest rate sensitivity.

Yield

The income returned on an investment, such as the interest or dividends received, typically expressed as a percentage of the investment’s cost or current market value.

Modified Duration

Modified Duration measures the sensitivity of the price of a bond or other debt instrument to a change in interest rates, indicating the percentage change in price for a parallel shift in rates.