Historical Cost Is Widely Used for Asset Valuation as It

question 63

Multiple Choice

Historical cost is widely used for asset valuation as it is regarded as providing more ____________ information than estimated market value.

• A) subjective
• B) relevant
• C) reliable
• D) accounting entity

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Definitions:

Risk-free Interest Rate

The theoretical rate of return of an investment with zero risk of financial loss, often represented by the yield on government bonds.

Two-factor Model

A financial model that considers two sources of risk in its valuation or pricing, typically used in evaluating or predicting financial returns.

Market Risk

The risk of losses due to factors that affect an entire market or asset class, also known as systematic risk, which cannot be eliminated through diversification.

Interest Rate Risk

The potential for investment losses resulting from changes in interest rates.