7-7

Government must classify investments into one of three categories of input to establish fair value.

A government holds the following investments. For each, indicate the category in which it should most likely be classified.

1. A 20 year, 4 percent corporate bond rated AA by a leading rating agency. The bond is not widely traded in a market.

2. Shares in a privatly held high-tech "start-up" company.

3. Shares in a corporation listed on the New York Stock exchange.

4. Interest rate swaps with a major bank as the counterparty.