Which of the Following Costs Related to a Business Car

question 33

Multiple Choice

Which of the following costs related to a business car would be capitalized?

• A) the cost to install an engine with higher horsepower
• B) the cost to change the oil
• C) the cost to replace a broken windshield
• D) the cost of new tires

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Definitions:

Maturity

The specified time at which the principal amount of a bond or loan is due to be paid back to the lender.

Call Premium

The additional amount that must be paid over the par value by the issuer to redeem a callable security before its maturity date.

Default Risk Premium (DRP)

The additional yield that investors demand for holding a bond that has a risk of default over a risk-free bond.

Liquidity Premium (LP)

Additional return that investors demand for holding an asset that is not easily convertible to cash without a loss in value.