Question 1

Calculating the volatility of the underlying stock is more complicated. Volatility is the standard deviation is the price of underlying stock. The volatility used in the Black Scholes model is the total volatility of the underlying stock's price. It is not its bets, which measures

Options :

A : The relative movement of the stock-s price to the market

B : That the stock-s price changes are relatively constant

C : Implied volatility

D : The number of outstanding shares of the issuer

Answer: A

Question 2

The primary ownership interest characteristics that need to be addressed in almost every business valuation are the following EXCEPT:

Options :

A : Control or minority valuation basis (not necessarily a black-and--white issue ____there may be elements of control without absolute control

B : Degree of marketability

C : Fair market value

D : Fair market value on a nonmarketable, non-controlling ownership interest basis.

Answer: C,D

Question 3

When is the guideline merged and acquired company method most useful?

Options :

A : The initial value derived from the guideline merged and acquired company method, before adjustment for factors such as size of subject block and degree of marketability, is an indication of transaction prices of major ownership interest, usually controlling ownership interests.

B : When same acquisition target has different buyers both due to perception and reality

C : At the time of achieving synergies

D : In estimation of enterprise value

Answer: A

Question 4

The FASB says that, for ''unobservable inputs,'' the valuation should include market participant assumptions about risk, even if this adjustment is different to determine. Interestingly, it breaks risk into following categories EXCEPT:

Options :

A : The risk inherent in a particular valuation technique

B : The risk inherent in inputs of the valuation technique

C : The explicit risk related to a particular valuation technique

D : The implicit risk related to a particular valuation technique

Answer: C,D

Question 5

The discount rate is a market-driven rate. It represents the expected yield rate-or rate of return-necessary to induce:

Options :

A : Investors to commit available funds to the subject investment, given its level of risk

B : Yield rate

C : Dividends

D : Investment yield

Answer: A

Higher Test Marks with Free Online CVA Exam Practice

Buying Options: