It is likely that the discrepancy between book value of equity and market value of equity will increase as volatility in interest rates increases.

Question

Quizplus · Accepted Answer

Interest rate volatility can affect the value of a company's assets and liabilities, which in turn affects its book value of equity. However, changes in market expectations and investor sentiment can also cause market value of equity to deviate from book value. As interest rate volatility increases, there is a higher chance of such market-based factors driving a wider discrepancy between book value and market value of equity.

It Is Likely That the Discrepancy Between Book Value of Equity