Use the Following Information to Answer Questions 22 Through 24

question 13

Multiple Choice

Use the following information to answer questions 22 through 24.On October 1,the one-month LIBOR rate is 4.50 percent and the two month LIBOR rate is 5.00 percent.The November Fed funds futures is quoted at 94.50.The contract size is $5,000,000.
-All of the following are limitations to Fed funds futures arbitrage,except

• A)Fed funds rates are determined by Federal Reserve Bank policy
• B)basis risk between Fed funds and LIBOR
• C)repo rate is variable for the trading horizon
• D)settlement is based on average in delivery month
• E)transaction costs

---

Definitions:

Departmental Cost Pools

Aggregations of all costs related to a specific department within a company, used in allocating costs to products or services.

Overhead Allocation Rates

A rate used to distribute overhead costs to products or services based on a predetermined formula, such as the amount of direct labor hours or machine hours used.

Departmental Overhead Rates

The allocation of indirect costs to specific departments based on relevant activity bases, to accurately reflect the costs incurred by each department.

Overhead Costs

Indirect costs not directly tied to a specific job, product, or service but necessary for the business operations.