The value of debt and equity securities is based upon:
A)The type of investment vehicle
B)The growth potential of the asset
C)The accounting method used for recording the asset
D)The present value of the cash flows that the securities are expected to provide.

Question

Quizplus · Accepted Answer

The value of debt and equity securities is based on the present value of the cash flows they are expected to provide. This can be determined by discounting future cash flows back to their present value using a discount rate that reflects the risk associated with those cash flows. Therefore, choice D is the best answer. The other choices are not relevant to determining the value of debt and equity securities.

The Value of Debt and Equity Securities Is Based Upon