Consider an Asset with a Current Market Value of $250

question 53

Multiple Choice

Consider an asset with a current market value of $250 000 and a duration of 3.3 years.Assume the asset is partially funded through zero-coupon bonds which currently sells for $225 000 and has a maturity of 4 years.The current discount rate is 15%.Calculate the duration gap for this scenario:

• A)-0.3 years
• B)0.3 years
• C)-0.7 years
• D)0.7 years

---

Definitions:

Normal Costing System

An accounting system that assigns costs to products based on the normal levels of materials, labor, and overhead.

Inventory Accounts

Accounts used to track the cost of goods a company has in stock during an accounting period, including raw materials, work in progress, and finished goods.

Actual Overhead Costs

The real costs that a company incurs for its indirect materials, indirect labor, and other overhead expenses.

Direct Labour Cost

The wages and benefits paid to workers who are directly involved in the manufacturing process.