Book Value Per Share May Not Approximate Market Value Per

question 13

Multiple Choice

Book value per share may not approximate market value per share because:

• A)the book value is after tax.
• B)book values are based on replacement costs rather than market values.
• C)book value is related to book figures and market value is related to the future potential as seen by investors.
• D)investors do not understand book value.
• E)book value is not related to dividends.

---

Definitions:

Flexible Exchange-Rate System

A currency valuation system where the value of a currency is allowed to fluctuate in response to foreign exchange market mechanisms.

Foreign-Exchange Reserves

Stockpiles of foreign currencies maintained by a nation’s central bank. Obtained when the central bank sells local currency in exchange for foreign currency in the foreign exchange market.

Terms of Trade

This refers to the ratio at which a country's exports are exchanged for its imports, influencing the country's economic health.

Real Interest Rates

The interest rate adjusted for inflation, representing the true cost of borrowing and the real yield to lenders.