What is the formula for fair value?

The fair value formula is as follows: Cash denotes the current value of the security. r is the prevailing interest rate charged by the broker. x is the number of days left in the contract (the futures contract expires in x number of days).

What is fair value?

Fair value is applicable to a product that is sold or traded in the market where it belongs or under normal conditions – and not to one that is being liquidated. It is determined in order to come up with an amount or value that is fair to the buyer without putting the seller on the losing end.

What is the fair value of an asset?

Fair value refers to the actual value of an asset – a product, stock, or security – that is agreed upon by both the seller and the buyer. Fair value is applicable to a product that is sold or traded in the market where it belongs or under normal conditions – and not to one that is being liquidated.

What are some examples of fair market value?

As a simple example, if you’re selling a used car, the highest bid received from a buyer is the fair market value (FMV), as long as the two aforementioned criteria are sufficiently met. Likewise, if you’re selling a house, your objective is to find a buyer willing to meet (or exceed) the asking price.