A company owns a financial asset that is actively traded on two different exchanges (market A and market B). There is no principal market for the financial asset. The information on the two exchanges is as follows
Quoted price of asset - Transaction costs
Market A: $1,000 - $ 75
Market B: 1,050 - 150
What is the fair value of the financial asset?
A. $ 900
B. $ 925
C. $1,000
D. $1,050

C. $1,000

Explanation:

The transaction is believed to have happened in the principal market for the liability or asset. When there is no present market like that, it is believed to happen market that is in more advantage. The market that is more advantage is the market in which the certain reporting entity can utilize the amount they received for selling the asset or minimize the amount paid for transferring the liability, after considering transportation and transaction and costs. The fair value is the price in that market with no adjustment for transaction costs. The entity will be able to receives $925 in only one condition, that is, if the asset is sold in Market X, but only $900 in Market Y. Therefore, Market X is the has more advantage, making the the fair value is $1,000. As our answer

of the three mortgage options that demarco and tanya have to choose from, the balloon payment mortgage would be their best option, over adjustable payment and fixed payment plans.ultimately, the balloon payment plan would save demarco and tanya overall, in interest, would cost less monthly, and they would only have to make these payments for 8 years, opposing to 30 years for adjustable or fixed payment plans. 

overall, demarco and tanya would save $80,811 if they chose balloon payments over fixed payments, and would save $116,711 if they choose balloon payments over adjustable payments. benefits with choosing fixed payments over adjustable payments is that, in the end, the payments will still be $836.30 a month, while with adjustable payments, the initial monthly payments will be $763.38 to $1082.70 a month, ultimately leading to a more costly purchase. benefits with choosing fixed payments over balloon payments are not present. benefits in choosing adjustable payments over is that it has a lower interest rate, and starts with lower monthly payments initially. benefits in choosing adjustable payments over balloon payments include a lower interest rate, and lower initial monthly payments. benefits in choosing balloon payments over fixed payments include lower interest rates, lower overall price, lower monthly payments, takes less time to pay off, and does not require a downpayment. benefits in choosing balloon payments over adjustable payments include, lower monthly payments (when averaged), takes less time to pay off, and lower overall price.

hence, option c, balloon payments, is the best option for demarco and tanya to make this purchase, for it will save them a minimum of $80811, and a maximum of $116,711.