1. On January 2, 2017, Mountain View Company, a public company, issued $50 million of two-year bonds bearing interest at 8% in denominations of $1,000, payable on December 31, 2018. The company has elected to value the bonds at fair value as it wishes to match the funding with the corresponding purchase of some fair value assets. The bonds are traded in an active market. Subsequent to January 2, 2017, interest rates have increased to 9% for similar new debt issues and the financial performance of Mountain View has deteriorated from the levels of 2015 and 2016. At December 31, 2017, the Company is trying to determine the fair value of the bonds.

• What valuation techniques would you propose that Mountain View use to measure the fair value of the bonds at December 31, 2017?

1. Discounted cash flow of $50 million due in one year at 9% interest
2. Discount to face value for similar bonds issued
3. Quoted market prices in an active market
4. Fair value as a percentage of the fair value of the assets at December 31, 2017 (percentage of assets at January 2, 2017 X fair value of assets at December 31, 2017)