An auto manufacturer is conducting a market study for a new model. It is afraid that the new car may cannibalize sales from its existing lineup. The sales director thinks that based on past experience, as much as 20% or more of existing buyers would move to the new model. The market research department is setting up the null hypothesis to test the effect of the new model on existing model sales. If u represents the erosion of sales of the current model, which of the following is the most appropriate null hypothesis?

• A.u >= 0%
• B.u = 20%
• C.u >= 20%

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Which of the following is not a reason that explains why prepayment rates tend to be low for manufactured housing loans?

• A.The loan rates are already relatively low to begin with.
• B.The collateral depreciates in value rather quickly, thus hampering refinancing efforts.
• C.The creditworthiness of borrowers in this market tends to be relatively low.

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Which one of the following is not a component of pension expense?

• A.Expected return on plan assets.
• B.Amortization of projected benefit obligation.
• C.Interest costs on benefit obligations.

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Duration estimates for option-free bonds are

• A.stable when interest rate shocks are either small or large.
• B.stable only when interest rate shocks are small.
• C.volatile when interest rate shocks are large.

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A firm had an asset with a carrying value of $600,000. The estimated future discounted cash flows from the use of the asset have decreased to $300,000. If the fair value of the asset is $350,000, an impairment loss should be recognized in the amount of (Under U.S. GAAP):

• A.$50,000
• B.$250,000
• C.$300,000

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