The Book Value Is Generally Less Than the Market Value

question 18

Multiple Choice

The book value is generally less than the market value of a firm because:

• A) Capital markets are not strong-form efficient
• B) Certain intangibles may not meet the asset recognition criteria
• C) Assets may be overvalued by unethical managers
• D) The market values of assets are difficult to measure

---

Definitions:

Uncovered Interest Parity

A financial theory stating that the difference in interest rates between two countries is equal to the expected change in exchange rates between those countries' currencies.

Forward Exchange Rate

The rate agreed upon for exchanging one currency for another at a future date.

Spot Exchange Rate

The immediate rate at which one can purchase or sell currency for on-the-spot delivery.

London Interbank Offer Rate

LIBOR; a benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans.