The difference between a closing price and a valuation is

• A. A closing price changes hourly and a valuation is a summary price generally taken at 4:00 pm in a local market
• B. A closing price is based on a last sale at a set time and a valuation is a modeled price and more of a theoretical closing price
• C. Valuations are considered a more accurate representation of a security's value whereas a closing price is simply a last trade
• D. Valuations are always equal to closing price

Answer: (B)

The main idea is distinguishing an observed market price from a price produced by a model. A closing price reflects the last trade that actually occurred at the market’s close, so it’s an observed price based on real transactions at a specific time. A valuation, on the other hand, is a modeled price—an estimate produced by pricing models and assumptions when there may not be a recent trade or when a standardized price is needed for reporting. That’s why choosing a description that says the closing price is based on a last sale at a set time and the valuation is a modeled, theoretical closing price best captures the difference.

Think of it this way: the closing price is what someone actually paid in the market, while a valuation is a calculated estimate, which can differ from the actual closing price depending on the inputs and methods used. The other options imply things like valuations always matching closing prices or that closing prices change hourly or are fixed at a specific time, which isn’t how these concepts are typically used.