1. Hoppy Corporation is comparing its flexible budget to the planning budget prepared at the beginning of the month. When the actual level of activity is less than the planning budget, all of the following would occur when comparing the flexible budget to the planning budget, except:
a Fixed costs should show no variances.
b Costs with both fixed and variable components would show favorable variances.
c Revenue should show an unfavorable variance.
d Variable costs should show unfavorable variances.
2. You bought one of Great White Shark Repellant Co.’s 9 percent coupon bonds one year ago for $770. These bonds make annual payments and mature 12 years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 12 percent. If the inflation rate was 3.1 percent over the past year, what was your total real return on investment?
a) 21.06%
b) 13.89%
c) 13.99%
d) 14.59%
e) 2.56%