Why Is the Value of Many Derivatives Difficult to Determine

question 33

Multiple Choice

Why is the value of many derivatives difficult to determine for accounting purposes?

• A)Many derivative decline in value over time,so only average values can be determined.
• B)Many derivative fluctuate in value over time,so only average values can be determined.
• C)Many derivatives are controlled by governments,so the stated value of a derivative may not be its actual value.
• D)Many derivatives are private contracts for which there is no active market,so values are difficult to determine.

---

Definitions:

Inflation

A general increase in prices and fall in the purchasing value of money over time.

Real GDP

Real Gross Domestic Product, indicating the total value of all produced goods and services in an economy for a year, adjusted to account for inflation, thereby showing true economic value.

Price Level

Calculating the average price across every good and service in the economy's production.

GDP Deflator

A measure of the level of prices of all new, domestically produced, final goods and services in an economy in a year, used to deflate or adjust GDP for inflation.