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Question 1

The fundamental of CAPM is:

AThat the risk premium portion of the expected return on a security is a function of that security's systematic risk.

BThat the risk premium portion of the expected return on a security is a function of that security's unsystematic risk.

CThat the risk discount portion of the expected return on a security is a function of that security's systematic risk.

DThat the risk discount portion of the expected return on a security is a function of that security's unsystematic risk.

Answer : A

Question 2

The fundamental risk measures and their correlation coefficient with observed equity risk premiums are as follows EXCLUDING:

AOperating margin

BVolatility of earnings or cash flows

CCoefficient of variation of return on book value of equity

DCoefficient of variation of operating margins

Answer : B

Question 3

There is an additional ____________ valuation rule, which requires that the appraiser determine whether any of the extraordinary payment rights, if exercised in conjunction with any qualified distribution rights, would lower the total value of the preferred security.

ALower of

BSeparate Command

CMandatory redemption rights

DLower in

Answer : A

Question 4

The primary impact on the value of a sinking fund preferred stock results from the fact that redemption creates a finite stream of income to the investor plus________________.

AA terminal value versus a theoretically infinite stream of income available to the nonsinking
fund preferred stockholder.

BA negative value versus a theoretically infinite stream of income available to the nonsinking fund preferred stockholder.

CA terminal value versus a theoretically finite stream of income available to the nonsinking fund preferred stockholder.

DA positive value versus a theoretically finite earning available to the non-sinking fund preferred stockholder.

Answer : A

Question 5

A major issue in many fair value cases is:

AWhether or not discounts and/or premiums are applicable

BLack of control

CLack of marketability

Dlack of ownership control premiums under certain specific circumstances.

Answer : A

Question 6

The basic valuation model, which is central to the income approach to valuation, has only two variables. Which of the following is/are NOT out of those variables?

AThe amount of the expected prospective economic income in each period

BThe required rate of return (yield rate) by which the expected prospective economic income receipts should be discounted

CCommon equity

DEconomic income measured

Answer : C, D

Question 7

Proprietary technology is also counted in intangibles such as, a trained and assembled workforce, special know-how, customer relationships, supplier relationships, or other intangible assets that make the company available competitors and give it earning power. Some closely held business owners call these intangibles:

ABlue sky

BGood will

CPatents

DA or B

Answer : D

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