Investment Advisor Securities Analysis and Valuation 2

Question 1

Yield to maturity (YTM) on a bond is best described as:

Accepted Answer

The total return anticipated if the bond is held until it matures

Answer

The annual coupon payment divided by face value

Answer

The current yield adjusted for inflation

Answer

The coupon rate minus the current market yield

Question 2

A bond's duration is primarily used to measure:

Accepted Answer

The bond's sensitivity to changes in interest rates

Answer

Credit risk relative to government bonds

Answer

The likelihood of issuer default

Answer

The bond's liquidity in secondary markets

Question 3

In fundamental analysis, which financial ratio measures how efficiently a company uses its assets to generate revenue?

Accepted Answer

Asset turnover ratio

Answer

Debt-to-equity ratio

Answer

Current ratio

Answer

Profit margin

Question 4

A 50-day moving average crossing above a 200-day moving average is commonly known as a:

Accepted Answer

Golden cross

Answer

Death cross

Answer

Support breakout

Answer

Bearish divergence

Question 5

EBITDA is most useful as a valuation metric because it:

Accepted Answer

Approximates operating cash flow by excluding non-cash and financing items

Answer

Reflects actual cash available to shareholders

Answer

Accounts for capital expenditure requirements

Answer

Includes changes in working capital

Question 6

Which of the following best describes free cash flow (FCF)?

Accepted Answer

Operating cash flow minus capital expenditures

Answer

Net income plus depreciation and amortization

Answer

Gross profit minus operating expenses

Answer

EBITDA minus interest expense

Question 7

When performing relative valuation, an analyst compares a company's valuation multiples to those of its peers primarily to:

Accepted Answer

Identify whether the company appears over- or undervalued relative to similar firms

Answer

Determine the precise intrinsic value of the company

Answer

Predict future earnings growth with certainty

Answer

Calculate the company's weighted average cost of capital