Final answer:
An adjustment to financial statements is least likely for changes in market prices of securities after the balance sheet date. Money may not be physically in the bank due to the asset-liability time mismatch. When buying loans in the secondary market, the price paid depends on borrower reliability and changes in economy-wide interest rates.
Step-by-step explanation:
The student's question pertains to subsequent events and their impact on financial statement adjustments. An adjustment to the financial statements is least likely with the change in market prices of securities after the balance sheet date. Subsequent events that provide additional information about conditions that existed at the balance sheet date often require adjustments. However, changes in market prices of securities after the balance sheet date are typically indicative of conditions arising after that date, and therefore do not usually warrant an adjustment to the financial statements as they are non-recognized events that are disclosed, if material.
Now, addressing the provided information:
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- Money listed under assets on a bank balance sheet may not actually be in the bank due to the asset-liability time mismatch, where customers can withdraw a bank's liabilities in the short term while assets, like loans, are repaid in the long term.
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- In the situation of buying loans in the secondary market, the price you might be willing to pay for a loan would vary:
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- You would likely pay less if the borrower has a history of late payments due to increased risk.
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- If interest rates have risen since the loan was made, the existing loan's lower interest may be less attractive, leading you to pay less for it.
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- You might pay more for a loan if the borrower, particularly a firm, has declared high profits as this suggests improved creditworthiness.
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- If overall interest rates have fallen, the higher-rate loan could be more valuable, leading you to pay more.
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