FA Capital Markets and Investment Analysis 3

Question 1

What is the yield to maturity (YTM) of a bond?

Accepted Answer

The total return anticipated if held to maturity, expressed as an annual rate

Answer

The coupon rate divided by par value

Answer

The current market price of the bond

Answer

The spread over the benchmark Treasury rate

Question 2

Which valuation method estimates a company's value based on how similar companies are priced in the market?

Accepted Answer

Comparable Company Analysis (Comps)

Answer

Discounted Cash Flow (DCF)

Answer

Liquidation Value

Answer

Book Value Method

Question 3

The equity risk premium (ERP) is defined as:

Accepted Answer

The excess return that investing in equities provides over a risk-free rate

Answer

The return on government bonds minus inflation

Answer

The dividend yield of the S&P 500

Answer

The standard deviation of equity returns

Question 4

What is a leveraged buyout (LBO)?

Accepted Answer

The acquisition of a company using a significant amount of borrowed money

Answer

A company buyback of its own shares using cash reserves

Answer

A merger financed entirely through stock exchange

Answer

A government purchase of distressed company assets

Question 5

Which of the following is a measure of the duration of a bond's cash flows?

Accepted Answer

Modified Duration

Answer

Convexity

Answer

Yield Spread

Answer

Credit Rating

Question 6

What type of analysis compares a company's value to its precedent acquisition transactions?

Accepted Answer

Precedent Transaction Analysis

Answer

Comparable Company Analysis

Answer

Sum-of-the-Parts Analysis

Answer

Replacement Cost Analysis