American Bankers Association Exam CTFA Topic 7 Question 73 Discussion

Actual exam question for American Bankers Association's CTFA exam

Question #: 73
Topic #: 7

[All CTFA Questions]

The amount that currently would be required to replace the service capacity of an asset is called:

ARisk approach

BMarket approach

CIncome approach

DCost approach

Show Suggested Answer

Suggested Answer: D

by Paris at Aug 23, 2024, 12:51 AM

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Tawanna

8 months ago

The cost approach is the way to go, my friend. It's like when your car breaks down - you gotta look at how much it would cost to get a new one, not how much you could sell your old one for, am I right?

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Kimbery

8 months ago

I'm gonna have to go with the cost approach on this one. It's the only one that makes sense when you're talking about replacing something, right? Unless the question is asking about a completely new asset, in which case the market approach might work.

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Margurite

7 months ago

I'm leaning towards the cost approach as well, it just seems like the most practical choice.

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Effie

7 months ago

The income approach wouldn't really make sense when it comes to replacing the service capacity of an asset.

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Dino

7 months ago

I think the market approach could also be a valid option depending on the context of the question.

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Terrilyn

7 months ago

I agree, the cost approach seems like the most logical choice in this scenario.

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Clorinda

8 months ago

The income approach wouldn't really make sense when talking about replacing the service capacity of an asset.

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Geraldo

8 months ago

I think the market approach could also be a valid option depending on the context of the question.

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Marge

8 months ago

I agree, the cost approach seems like the most logical choice in this scenario.

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Naomi

9 months ago

Cost approach, definitely. I mean, how else would you know how much it would take to replace the asset? You can't just pull a number out of thin air, can you?

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Marjory

9 months ago

I'm not sure, but I think it could also be A) Risk approach, as it considers potential risks associated with replacing the service capacity.

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Tegan

9 months ago

The income approach sounds interesting, but I'm not sure how that would apply to replacing an asset's service capacity. Isn't that more about the asset's earning potential?

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Diane

9 months ago

The cost approach is the amount required to replace the service capacity of an asset.

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Justine

9 months ago

The income approach focuses on the asset's earning potential.

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Veronika

9 months ago

Hmm, I was thinking the market approach might be the right answer. Isn't that the one that looks at what similar assets are selling for on the open market?

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Rueben

8 months ago

I think the cost approach might also be a good option, as it looks at the amount required to replace the service capacity of an asset.

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Josue

8 months ago

Yes, you're correct. The market approach does consider what similar assets are selling for on the open market.

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Carlee

8 months ago

D) Cost approach

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Lindsay

9 months ago

C) Income approach

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Laurene

9 months ago

B) Market approach

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Emogene

9 months ago

A) Risk approach

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Krystal

9 months ago

I agree with Sheridan, because the cost approach considers the amount needed to replace the service capacity.

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Ines

9 months ago

I'm pretty sure it's the cost approach. That's the one that takes into account the actual cost to replace the asset, right?

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Grover

9 months ago

I believe it's the income approach. It focuses on the income generated by the asset when determining the amount needed to replace its service capacity.

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