The Fair Value of Financial Instruments Acquired in a Business

question 25

Multiple Choice

The fair value of financial instruments acquired in a business combination will be:

• A) market value in an active market.
• B) an estimate of fair value.
• C) either A or B.
• D) none of the above.

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Definitions:

Mortgage Pass-through Securities

Financial instruments that pool together home mortgage loans and allow investors to receive payments based on the underlying mortgages' interest and principal repayments.

Poor Credit Ratings

Indicates a low assessment of creditworthiness, suggesting that the individual or entity is a higher risk to lenders.

Relatively Safe

This term refers to something considered to be safe within a certain context or comparison but not absolutely risk-free.

Commercial Paper

An unsecured, short-term debt instrument issued by corporations, typically used for the financing of payroll, accounts payable, and inventories.