Question

Which of the following is true for market value accounting method?...

Which of the following is true for market value accounting method?

a.

FIs generally report their balance sheets using this method.

b.

None of the options.

c.

Reports assets and liabilities at the original issue values.

d.

It reflects economic reality of assets and liabilities if the FI's portfolio were to be liquidated at today's securities prices.

e.

Interest rate changes do not affect the valuation of the prices of assets and liabilities.

Answer & Explanation
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The answer is option D

It reflects the economic reality of assets and liabilities if the FI's portfolio were to be liquidated at today's securities prices.

Step-by-step explanation

Market value is the estimated worth of an asset at the current market. The market value accounting approach reflects economic reality, or the true values of assets and liabilities if the FI's portfolio were to be liquidated at today's securities prices rather than at the prices when the assets and liabilities were originally purchased or sold. This practice of valuing securities at their market value is referred to as marking to market. Therefore, market value is what a buyer believes it is worth at a given point in time.