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

YTM is the total annualized return an investor will earn if the bond is purchased at its current price and held to maturity, accounting for coupon payments and capital gain or loss.

Question 2

A bond's duration is primarily used to measure:

Accepted Answer

The bond's sensitivity to changes in interest rates

Answer

Duration measures a bond's price sensitivity to interest rate changes; a higher duration means greater price volatility when rates move.

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

The asset turnover ratio (revenue ÷ total assets) indicates how effectively management uses the company's assets to produce sales.

Question 4

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

Accepted Answer

Golden cross

Answer

A golden cross occurs when a short-term moving average (e.g., 50-day) crosses above a long-term moving average (e.g., 200-day), which is considered a bullish signal.

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

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) removes non-cash charges and financing structure effects, making it easier to compare operating performance across companies.

Investment Advisor Practice Test

Investment Advisor Practice Test

Investment Advisor Securities Analysis and Valuation 2