Duration Is Seen as a More Complete Measure of an Asset

question 49

Multiple Choice

Duration is seen as a more complete measure of an asset or a liability's interest rate sensitivity than maturity because it takes into account the:

• A)size of cash flows
• B)timing of cash flows
• C)size of cash flows and the asset or liability's time to maturity
• D)time of arrival of all cash flows plus the asset or liability's maturity

---

Definitions:

Direct Labor-Hours

A measure of the total hours worked by employees who are directly involved in the manufacturing process or production of goods.

Predetermined Overhead Rate

A rate used to apply manufacturing overhead to products or job orders, calculated before the period begins by dividing estimated overhead costs by an estimated allocation base.

Machine-Hours

A measurement of the amount of time machines are operated in the production process, used as an allocation base for applying manufacturing overhead.

Direct Labor-Hours

A measure of the total hours worked directly on a specific product or service by employees.