Equity Valuation Exam Questions
Course Introduction
Equity Valuation explores the fundamental concepts and analytical techniques used to estimate the value of publicly traded and privately held companies. The course examines different valuation approaches such as discounted cash flow (DCF), comparables, and asset-based models, emphasizing their application in investment analysis, corporate finance, and portfolio management. Students learn to interpret financial statements, assess market conditions, and evaluate both quantitative and qualitative factors affecting a firm's worth. By integrating real-world case studies and data analysis, the course equips participants with practical skills in conducting equity research and forming well-supported investment recommendations.
Recommended Textbook Fundamentals of Investments Valuation and Management 7th Edition by Bradford Jordan
Available Study Resources on Quizplus
20 Chapters
1857 Verified Questions
1857 Flashcards
Source URL: https://quizplus.com/study-set/2886 Page 2
Chapter 1: A Brief History of Risk and Return
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/57454
Sample Questions
Q1) The risk premium is defined as the rate of return on:
A)a risky asset minus the risk-free rate.
B)the overall market.
C)a U.S. Treasury bill.
D)a risky asset minus the inflation rate.
E)a riskless investment.
Answer: A
Q2) A stock had year end prices of $24,$27,$32,and $26 over the past four years,respectively.What is the geometric average return?
A)2.02 percent
B)2.18 percent
C)2.55 percent
D)2.70 percent
E)2.81 percent
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 3
Chapter 2: The Investment Process
Available Study Resources on Quizplus for this Chatper
98 Verified Questions
98 Flashcards
Source URL: https://quizplus.com/quiz/57453
Sample Questions
Q1) Taylor Industries stock is selling for $26 a share.You would like to purchase as many shares of this stock as you can.Your margin account currently has available cash of $4,700 and the initial margin requirement is 60 percent.What is the maximum number of shares you can buy?
A)193 shares
B)287 shares
C)301 shares
D)360 shares
E)408 shares
Answer: C
Q2) The determination of which individual stocks to purchase within a particular asset class is referred to as:
A)security selection.
B)asset allocation.
C)security analysis.
D)market timing.
E)market selection.
Answer: A
To view all questions and flashcards with answers, click on the resource link above.
Page 4
Chapter 3: Overview of Security Types
Available Study Resources on Quizplus for this Chatper
94 Verified Questions
94 Flashcards
Source URL: https://quizplus.com/quiz/57452
Sample Questions
Q1) What was the prior day's closing price on the 50 call option on JL stock?
A)$4.45
B)$4.75
C)$5.05
D)$5.10
E)$5.30
Answer: A
Q2) You own one futures contract on gold that you purchased at a quoted price of 948.4.The current price quote is 1008.8.The contract size is 100 ounces and the quotes are expressed in dollars and cents per ounce.What is your current profit or loss on this investment?
A)$30.40
B)$912.00
C)$3,040.00
D)$6,040.00
E)$9,120.00
Answer: D
To view all questions and flashcards with answers, click on the resource link above. Page 5
Chapter 4: Mutual Funds and Other Investment Companies
Available Study Resources on Quizplus for this Chatper
101 Verified Questions
101 Flashcards
Source URL: https://quizplus.com/quiz/57451
Sample Questions
Q1) Besides size,how else does a mutual fund style box classify equity funds?
A)cost and fees as a percent of NAV
B)taxability at federal, state, and local levels
C)value versus growth characteristics
D)age of the fund
E)short and long-term rates of return
Q2) The European Growth Fund has $820 million in assets and $76,000 in liabilities.There are 30.5 million shares outstanding.The fund charges a 4.4 percent front-end load.What is the offering price?
A)$26.08
B)$26.47
C)$27.54
D)$28.12
E)$29.74
Q3) Shares in closed-end funds:
A)can be resold to the fund at any time.
B)are more popular than shares in open-end funds.
C)may sell for more or less than the NAV.
D)are referred to as mutual fund shares.
E)cannot be resold.
To view all questions and flashcards with answers, click on the resource link above. Page 6
Chapter 5: The Stock Market
Available Study Resources on Quizplus for this Chatper
104 Verified Questions
104 Flashcards
Source URL: https://quizplus.com/quiz/57450
Sample Questions
Q1) What is the current structure of the NYSE?
A)general partnership
B)limited partnership
C)non-profit organization
D)publicly traded corporation
E)government agency
Q2) Stocks which are listed on the NYSE can:
A)not be listed on any other exchange.
B)only be dual listed on a regional exchange.
C)only be dual listed on Instinet.
D)only be dual listed on the Archipelago Exchange.
E)also be listed on NASDAQ.
Q3) An order to sell that involves a preset trigger point is called a _____ order.
A)limit
B)day
C)stop
D)short
E)market
Q4) Describe some of the recent changes in the structure and operations of the NYSE.
Q5) Describe the primary advantage and disadvantage of a limit sell order.
To view all questions and flashcards with answers, click on the resource link above. Page 7
Chapter 6: Common Stock Valuation
Available Study Resources on Quizplus for this Chatper
102 Verified Questions
102 Flashcards
Source URL: https://quizplus.com/quiz/57449
Sample Questions
Q1) Home Interiors has net income of $248,000.The firm has decided to pay $160,000 of that income out to the shareholders.What is the firm's retention ratio?
A).355
B).412
C).450
D).588
E).645
Q2) DT Industries stock is valued at $10.40 a share.The firm pays annual dividends at an increasing rate of 2.5 percent annually.Next year's dividend will be $1.05 per share.What is the required return on this stock?
A)10.00 percent
B)11.50 percent
C)12.60 percent
D)13.50 percent
E)14.80 percent
Q3) The residual income model for valuing a stock suffers from some of the same estimating errors as the dividend growth model.Identify and explain these estimating errors.
Q4) Identify three causes for a decrease in a firm's sustainable rate of growth.
To view all questions and flashcards with answers, click on the resource link above. Page 8
Chapter 7: Stock Price Behavior and Market Efficiency
Available Study Resources on Quizplus for this Chatper
82 Verified Questions
82 Flashcards
Source URL: https://quizplus.com/quiz/57448
Sample Questions
Q1) Amy uses two approaches to trading stocks.First,she trades on what she believes is a repetitive pattern as seen in Delta Co's historical prices.Secondly,she analyzes the financial statements of The Atwater Co.to compute changes in the return on equity as a predictor of future stock prices for that firm.She trades based on both strategies.Amy earns excess profits on her return on equity strategy but not on her historical prices strategy.This suggests that the market is at least _____ efficient but less than _____ efficient.
A)weak-form; mild-form
B)mild-form; semistrong-form
C)weak-form; semistrong-form
D)semistrong-form; full-form
E)semistrong-form; strong-form
Q2) Which one of the following terms is used to describe a market situation where prices are much higher than either fundamental or rational analysis would tend to support?
A)bear market
B)cloud
C)inversion
D)bubble
E)crash aversion
To view all questions and flashcards with answers, click on the resource link above.
Page 9
Chapter 8: Behavioral Finance and the Psychology of Investing
Available Study Resources on Quizplus for this Chatper
84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/57447
Sample Questions
Q1) Which of the following are bullish indicators?
I.flat advance/decline line
II.breakout of a support level
III.Arms ratio of .38
IV.heavy advancing volume
A)I and II only
B)III and IV only
C)I and III only
D)II and III only
E)I and IV only
Q2) A survey of 64 of your fellow classmates determines that 19 of them are bullish on the market while the remainder is bearish.What is the market sentiment index for this group of individuals?
A).28
B).33
C).44
D).58
E).70
Q3) Draw a basic Elliott Wave Pattern.Identify each wave and indicate the waves that are "corrective" and those that are "impulsive".
Page 10
To view all questions and flashcards with answers, click on the resource link above.
Chapter 9: Interest Rates
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/57446
Sample Questions
Q1) Which one of the following statements is correct?
A)The yield curve relates time to maturity to interest rates on zero-coupon bonds.
B)The yield curve is based on Treasury bill yields.
C)The term structure of interest rates is based on default-free, pure discount securities.
D)The term structure of interest rates is based on default-free, coupon bonds.
E)The yield curve ignores default risk while the term structure includes a default risk premium.
Q2) The following premiums apply to a 3-month bond: interest rate risk premium = 0.2 percent; real return = 1.9 percent; default premium = 0.8 percent; inflation premium = 1.4 percent.What is the expected nominal interest rate on a default-free security that has 3 months to maturity?
A)1.9 percent
B)2.0 percent
C)2.1 percent
D)3.3 percent
E)3.6 percent
Q3) Identify and describe five interest rates that directly apply to the money market.
To view all questions and flashcards with answers, click on the resource link above.
Page 11
Chapter 10: Bond Prices and Yields
Available Study Resources on Quizplus for this Chatper
95 Verified Questions
95 Flashcards
Source URL: https://quizplus.com/quiz/57445
Sample Questions
Q1) One year ago,you purchased a $1,000 face value bond at a yield to maturity of 9.45 percent.The bond has a 9 percent coupon and pays interest semiannually.When you purchased the bond,it had 12 years left until maturity.You are selling the bond today when the yield to maturity is 8.20 percent.What is your realized yield on this bond?
A)14.54 percent
B)15.27 percent
C)16.35 percent
D)17.60 percent
E)18.11 percent
Q2) A 6 percent,semiannual coupon bond has a yield to maturity of 7.4 percent and a Macaulay duration of 5.7.The bond has a modified duration of _____ and will have a _____ percentage increase in price in response to a 25 basis point decrease in the yield to maturity.
A)5.4829; 1.35
B)5.4966; 1.32
C)5.4966; 1.37
D)5.3073; 1.33
E)5.3073; 1.38
Q3) Identify and briefly explain four of Malkiel's five theorems.
To view all questions and flashcards with answers, click on the resource link above.
Page 12
Chapter 11: Diversification and Risky Asset Allocation
Available Study Resources on Quizplus for this Chatper
84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/57444
Sample Questions
Q1) The division of a portfolio's dollars among various types of assets is referred to as:
A)the minimum variance portfolio.
B)the efficient frontier.
C)correlation.
D)asset allocation.
E)setting the investment opportunities.
Q2) You own a stock which is expected to return 14 percent in a booming economy and 9 percent in a normal economy.If the probability of a booming economy decreases,your expected return will:
A)decrease.
B)either remain constant or decrease.
C)remain constant.
D)increase.
E)either remain constant or increase.
Q3) Explain the primary goal of portfolio diversification as it relates to asset allocation and correlation.
To view all questions and flashcards with answers, click on the resource link above.
13
Chapter 12: Return, Risk, and the Security Market Line
Available Study Resources on Quizplus for this Chatper
84 Verified Questions
84 Flashcards
Source URL: https://quizplus.com/quiz/57443
Sample Questions
Q1) Which one of the following measures systematic risk?
A)beta
B)alpha
C)variance
D)standard deviation
E)correlation coefficient
Q2) The stock of Healthy Eating,Inc.,has a beta of .88.The risk-free rate is 3.8 percent and the market return is 9.6 percent.What is the expected return on Healthy Eating's stock?
A)6.25 percent
B)6.07 percent
C)8.90 percent
D)11.15 percent
E)11.47 percent
Q3) Which one of the following has the highest expected risk premium?
A)stock portfolio with a beta of 1.06
B)U.S. Treasury bill
C)individual stock with a beta of 1.46
D)a stock mutual fund with a beta of .89
E)individual stock with a beta of .94
To view all questions and flashcards with answers, click on the resource link above.
Page 14
Chapter 13: Performance Evaluation and Risk Management
Available Study Resources on Quizplus for this Chatper
91 Verified Questions
91 Flashcards
Source URL: https://quizplus.com/quiz/57442
Sample Questions
Q1) The Jensen-Treynor alpha is equal to:
A)the Treynor ratio divided by Jensen's alpha.
B)the Treynor ratio multiplied by Jensen's alpha.
C)Jensen's alpha divided by beta.
D)Jensen's alpha divided by the standard deviation.
E)Jensen's alpha divided by the Treynor ratio.
Q2) You are comparing three securities and discover they all have identical Treynor ratios.Given this information,which one of the following must be true regarding these three securities?
A)They have identical betas.
B)They have the same rates of return.
C)They earn identical rewards per unit of total risk.
D)They earn identical rewards per unit of systematic risk.
E)They have identical Sharpe ratios also.
Q3) Which one of the following statements is true concerning VaR?
A)VaR ignores time.
B)VaR only applies to time periods of one year.
C)VaR applies only to time periods equal to or greater than one year.
D)VaR values can be computed for monthly time periods.
E)VaR is accurate only for time periods less than one year.
To view all questions and flashcards with answers, click on the resource link above. Page 15
Chapter 14: Futures Contracts
Available Study Resources on Quizplus for this Chatper
97 Verified Questions
97 Flashcards
Source URL: https://quizplus.com/quiz/57441
Sample Questions
Q1) In which city does the largest volume of futures trading in the United States occur?
A)Boston
B)New York
C)Chicago
D)Kansas City
E)Minneapolis
Q2) You are a wheat farmer with a crop that will be ready to harvest in approximately three months.How can you hedge this crop and what are the advantages and disadvantages of doing so?
Q3) Will purchased 3 futures contracts on corn.The contract size is 5,000 bushels and the price is quoted in cents per bushel.Assume the initial margin requirement is 4.5 percent of the contract value.What is the amount of the initial margin if the futures quote is 624?
A)$140.40
B)$421.20
C)$1,404
D)$2,808
E)$4,212
To view all questions and flashcards with answers, click on the resource link above.
Page 16
Chapter 15: Stock Options
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/57440
Sample
Questions
Q1) A list of available option contracts and their prices for a particular security listed in order of strike price and maturity date is referred to as which one of the following?
A)value chain
B)intrinsic list
C)option chain
D)strike list
E)exercise price display
Q2) Tim purchased 5 put option contracts on Western Fields stock.The strike price was $35 and the option premium was $0.55.At expiration,the stock was selling for $35.75.What is the payoff on the option contracts?
A)-$60
B)-$30
C)$0
D)$30
E)$60
Q3) Explain how options can be used to manage risk.Provide an example using a call option and another example using a put option.
To view all questions and flashcards with answers, click on the resource link above.
Page 17
Chapter 16: Option Valuation
Available Study Resources on Quizplus for this Chatper
72 Verified Questions
72 Flashcards
Source URL: https://quizplus.com/quiz/57439
Sample Questions
Q1) An increase in which one of the following will have a negative effect on the price of a call option?
A)option strike price
B)time remaining to option expiration
C)underlying stock price
D)volatility of the underlying stock price
E)risk-free interest rate
Q2) A stock with a current price of $32 will either move up to $40.00 or down to $30 over the next period.The risk-free rate of interest is 3 percent.What is the value of a call option with a strike price of $35?
A)$1.30
B)$1.44
C)$1.87
D)$2.09
E)$2.41
Q3) Draw a graph with the option price on the vertical axis and the time to expiration on the horizontal axis.Illustrate how put and call option prices vary as the time to expiration increases.
To view all questions and flashcards with answers, click on the resource link above.
Chapter 17: Projecting Cash Flow and Earnings
Available Study Resources on Quizplus for this Chatper
100 Verified Questions
100 Flashcards
Source URL: https://quizplus.com/quiz/57438
Sample Questions
Q1) Which one of the following is generally used as the basis for computing the cash flow per share?
A)operating cash flow
B)investment cash flow
C)financing cash flow
D)net cash increase
E)retained cash earnings
Q2) Regulation FD requires companies to do which one of the following when disclosing material non-public information?
A)advise the SEC 7 working days prior to such disclosure
B)disclose the information without preference to any party or parties
C)only disclose the information to professional analysts
D)only disclose the information after a 7-day advance notice of an announcement
E)disclose the information only after a 24-hour delay
Q3) Which one of the following is the definition of operating cash flow?
A)revenue minus expenses
B)cash realized from the sale of assets
C)cash flow originating from the issuance of securities
D)cash generated by a firm's normal business activities
E)pre-tax income
To view all questions and flashcards with answers, click on the resource link above. Page 19
Chapter 18: Corporate and Government Bonds
Available Study Resources on Quizplus for this Chatper
107 Verified Questions
107 Flashcards
Source URL: https://quizplus.com/quiz/57437
Sample Questions
Q1) Which one of the following is a municipal bond that is secured by the income collected from a specific project?
A)agency bond
B)general obligation bond
C)development bond
D)contingency bond
E)revenue bond
Q2) Adjustable-rate bonds are identified by which one of the following characteristics?
A)The coupon rate will increase should the credit rating of the bond decline.
B)Different bonds within the same issue have different coupon rates.
C)Bondholders can defer coupon payments at their discretion.
D)The amount of each coupon payment will depend on the free cash flow of the issuer.
E)The coupon rate changes in response to changes in current market rates.
Q3) What is the advantage of purchasing a STRIPS over a Treasury note?
Q4) How is the minimal value for a convertible bond determined?
Q5) Why would an investor prefer a TIPS which offers a lower coupon rate over a comparable T-note with a higher coupon rate?
Q6) Explain how the imputed interest is computed on a U.S.Treasury bill.
To view all questions and flashcards with answers, click on the resource link above. Page 20
Chapter 19: Global Economic Activity and Industry Analysis
Available Study Resources on Quizplus for this Chatper
70 Verified Questions
70 Flashcards
Source URL: https://quizplus.com/quiz/57436
Sample Questions
Q1) In the U.S.,what percentage of the GDP is consumer spending?
A)45%
B)55%
C)65%
D)75%
E)85%
Q2) You invest $60,000 in Germany when the exchange rate is $1.41/ .Your investment gains 12%,and you subsequently exchange the euros back into dollars at a rate of $1.49/ .What is your total percentage return on this investment?
A)17.48%
B)17.89%
C)18.10%
D)18.35%
E)18.85%
Q3) Which of the following is NOT considered a lagging economic indicator?
A)prime rate
B)change in CPI for services
C)industrial production
D)commercial and industrial loans
E)consumer expectations index
To view all questions and flashcards with answers, click on the resource link above. Page 21
Chapter 20: Mortgage-Backed Securities
Available Study Resources on Quizplus for this Chatper
92 Verified Questions
92 Flashcards
Source URL: https://quizplus.com/quiz/57435
Sample Questions
Q1) Which one of the following is the measure of interest rate risk for fixed-income securities?
A)standard deviation
B)Macaulay duration
C)variance
D)Jensen's alpha
E)beta
Q2) You have a 30-year,fixed-rate mortgage with equal monthly payments.The amount of interest you pay each month will _____ and the amount of principal you pay each month will ____.
A)decrease; decrease B)decrease; increase C)increase; decrease D)increase; increase E)remain constant; remain constant
Q3) What are the advantages and the disadvantages of a homeowner selecting a 30-year mortgage rather than a 20-year mortgage?
Q4) Explain what a reverse mortgage is,how it works,and who it is intended to help.
Q5) How do CMOs increase the availability of mortgage funds?
To view all questions and flashcards with answers, click on the resource link above. Page 22