Book value accounting and market value accounting

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Reference no: EM131990001

1. What is the difference between book value accounting and market value accounting? How do interest rate changes affect the value of bank assets and liabilities under the two methods? What is marking to market?

2. Consider a person with the following value function under prospect theory: v(w) = w.0.7 if w 0 =-2(-w)0.7 if w < 0 Assume that this individual weight values by probabilities, instead of using the prospect theory weighting function. What is the value of the following prospect? P1 (0.3, 1000, -800).

Reference no: EM131990001

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