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Question 1 of 10
1. Question
There are a few criteria needed to select a valuation model. Which of the following criteria is not considered for these selection?
Correct
The selection of a model compatible with the characteristics of the organization being assessed is supported by a strong understanding of the market. Part of the understanding of a business is to consider the essence of its properties and how those assets generate value.
Incorrect
The selection of a model compatible with the characteristics of the organization being assessed is supported by a strong understanding of the market. Part of the understanding of a business is to consider the essence of its properties and how those assets generate value.
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Question 2 of 10
2. Question
What are the things that CFA members and candidates should be mindful of in creating or maintaining investment services or investment products or packages of securities and/or derivatives?
Correct
CFA Members or Candidates should make logical attempts to analyze whether affiliated companies providing goods or services that are produced by their company must also comply with the laws and regulations of the countries and regions of delivery. They should exercise the requisite due diligence in transacting cross-border business in order to recognize the various laws and regulations in force in order to maintain the integrity of their company and themselves.
Incorrect
CFA Members or Candidates should make logical attempts to analyze whether affiliated companies providing goods or services that are produced by their company must also comply with the laws and regulations of the countries and regions of delivery. They should exercise the requisite due diligence in transacting cross-border business in order to recognize the various laws and regulations in force in order to maintain the integrity of their company and themselves.
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Question 3 of 10
3. Question
In understanding and implementing their responsibilities, who should CFA members and candidates seek for proper guidance?
Correct
CFA Members and Candidates should often follow suitable advice, including the compliance of the firm or legal divisions and legal counsel outside the organization, in order to achieve a fair understanding of their duties and how to carry them out effectively to ensure that all activities are carried out efficiently.
Incorrect
CFA Members and Candidates should often follow suitable advice, including the compliance of the firm or legal divisions and legal counsel outside the organization, in order to achieve a fair understanding of their duties and how to carry them out effectively to ensure that all activities are carried out efficiently.
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Question 4 of 10
4. Question
Which of the following is not true regarding the impact of having disclosure of “Material” information?
Correct
There are several examples of material knowledge that can, but not limited to, contain information on the following:
(1) Earnings
(2) Mergers, acquisitions, tenders, or joint partnerships
(3) Improvements in the condition of properties or assets
(4) New technologies, procedures, or discoveriesIncorrect
There are several examples of material knowledge that can, but not limited to, contain information on the following:
(1) Earnings
(2) Mergers, acquisitions, tenders, or joint partnerships
(3) Improvements in the condition of properties or assets
(4) New technologies, procedures, or discoveries -
Question 5 of 10
5. Question
After a company report of profits that is posted on the internet and distributed widely through a press release, what should the members and candidates expect to have it considered already as public?
Correct
However, it is not appropriate to wait for the slowest distribution process. When the material is made accessible to the sector, it is the public information that is no longer protected by the guidelines. In specific, CFA Members and Candidates must be mindful of details that is especially revealed by companies to a select number of customers, analysts, or other market participants
Incorrect
However, it is not appropriate to wait for the slowest distribution process. When the material is made accessible to the sector, it is the public information that is no longer protected by the guidelines. In specific, CFA Members and Candidates must be mindful of details that is especially revealed by companies to a select number of customers, analysts, or other market participants
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Question 6 of 10
6. Question
Under the “mosaic theory”, what are the advantages that financial analysts have when gathering and interpreting large quantities of information?
Correct
The practice of financial analysis is based on the free flow of information. Analysts and investors must provide different volumes of knowledge practicable and reliable, timely and intelligible for the equal and effective functioning of capital markets in order to promote well-informed investment decisions about how and when to spend capital
Incorrect
The practice of financial analysis is based on the free flow of information. Analysts and investors must provide different volumes of knowledge practicable and reliable, timely and intelligible for the equal and effective functioning of capital markets in order to promote well-informed investment decisions about how and when to spend capital
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Question 7 of 10
7. Question
Which of the following is not a function of valuation in addition to stock collection by active traders?
Correct
It is important to choose the right valuation approach since this will mean that it is:
(1) Stable with the characteristics of the company being valued
(2) Relevant with the availability and quality of data
(3) Consistent with the grounds and outlook of the analyst’s valuationIncorrect
It is important to choose the right valuation approach since this will mean that it is:
(1) Stable with the characteristics of the company being valued
(2) Relevant with the availability and quality of data
(3) Consistent with the grounds and outlook of the analyst’s valuation -
Question 8 of 10
8. Question
Which of the following statements clearly emphasize the flaw in the sentence “No equity investor needs to understand valuation models because real-time market prices are now easy to obtain online”
Correct
Knowing what an asset is worth and what determines the valuation is a prerequisite for good decision-making if they chose to invest in a portfolio, settle on the right price to be paid or obtained in a takeover, and make investment, funding, and dividend decisions while they manage a company. Certain properties are significantly easier to value than others, and these valuation specifics vary from asset to asset, and the unpredictability of value judgments is different for different assets, but the underlying values remain the same for each
Incorrect
Knowing what an asset is worth and what determines the valuation is a prerequisite for good decision-making if they chose to invest in a portfolio, settle on the right price to be paid or obtained in a takeover, and make investment, funding, and dividend decisions while they manage a company. Certain properties are significantly easier to value than others, and these valuation specifics vary from asset to asset, and the unpredictability of value judgments is different for different assets, but the underlying values remain the same for each
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Question 9 of 10
9. Question
Intrinsic Value is characterized as “the value of the asset given the hypothetically complete understanding of the investment characteristics of the asset.” Identify the explanation that better explains why “hypothetically” is included in its meaning and practical implications(s)
Correct
Awareness of the investment characteristics of the stock is still inadequate. As a result, an investor may only provide a rough approximation of the intrinsic value, and successful security selection is at risk of making mistakes in the estimation of these values. However, by knowing the value of the stock, the investor can decide whether the stock is over-or under-valued at its current market price.
Incorrect
Awareness of the investment characteristics of the stock is still inadequate. As a result, an investor may only provide a rough approximation of the intrinsic value, and successful security selection is at risk of making mistakes in the estimation of these values. However, by knowing the value of the stock, the investor can decide whether the stock is over-or under-valued at its current market price.
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Question 10 of 10
10. Question
Which of the following statements does not discuss why understanding a company’s business is useful in performing a sensitivity analysis related to the valuation of the company?
Correct
Sensitivity analysis is one of the most critical aspects of translating forecasts to valuation. This is often used to evaluate how improvements to the finished input will impact the outcome of the study
Incorrect
Sensitivity analysis is one of the most critical aspects of translating forecasts to valuation. This is often used to evaluate how improvements to the finished input will impact the outcome of the study