17 CFA Level 2 Practice Questions Free on Alternative Investments

17 CFA Level 2 Practice Questions Free on Alternative Investments help you completely get advantages over other candidates in the CFA exams. CFA level 2 practice exams free with free multiple choice questions and instant answers are truly considered as a useful study method highlighting the significant alternative investments concepts and give clear explanation in detail. By that way, you can tackle with complicated exercises with trouble-free; polish the essential skills for this subject in the next exam. Also, testing online not only saves your time but also your money, not similar to take a direct course out there. Try it out right now to become qualified as soon as possible.
To view full questions and answers, please kindly visit our site:  http://cfaexampreparation.com/1112/17-cfa-level-2-practice-questions-free-on-alternative-investments/

What are three phases that firms go through in terms of growth?

• 1) dividends2) free cash flow3) residual income
• 1) dividends are less volatile than other measures
• 1) initial growth phase2) transition phase3) mature phase
• 1) Gordon growth2) market multiple approach

What are two methods of determining a terminal value?

• 1) Gordon growth2) market multiple approach
• 1) difficult to implement for non-dividend payers
• = b X ROE where b = 1 - payout ratio
• 1) dividends are less volatile than other measures

When is the residual income approach appropriate?

• 1) initial growth phase2) transition phase3) mature phase
• 1) dividends are less volatile than other measures
• 1) dividends2) free cash flow3) residual income
• 1) firms w/no dividend history2) firms w/negative free cash flow3) firms w/transparent financial reporting and high quality earnings

What is the sustainable growth rate formula?

• 1) difficult to implement for non-dividend payers
• 1) Gordon growth2) market multiple approach
• = b X ROE where b = 1 - payout ratio
• 1) dividends are less volatile than other measures

What are some limits to the GGM?

• amount of earnings during the period that exceeds the investors required return
• 1) difficult to implement for non-dividend payers
• 1) dividends are less volatile than other measures
• 1) valuations are sensitive to estimates of growth rates and required rates of return2) model cannot be easily applied to non-dividend-paying stocks3) unpredictable growth patterns of some firms

The GGM is applicable to appropriate for modelling:

• 1) stable, mature, dividend-paying firms2) valuing market indices3) easily communicated and explained because of it straightforward approach4) can be used to determine price-implied growth rates, required rates of return and value of growth opportunities5) can be used to supplement other, more complex valuation methods
• 1) dividends2) free cash flow3) residual income
• 1) firms w/no dividend history2) firms w/negative free cash flow3) firms w/transparent financial reporting and high quality earnings
• 1) company has a history of dividend payments2) dividend policy is clear and related to the earnings of the firm3) perspective is that of a minority sharholders

What is free cash flow?

• 1) Gordon growth2) market multiple approach
• 1) dividends are less volatile than other measures
• accurately forecasting dividends for many periods
• operating cash flow less capital investment required to sustain the firm's productive capacity

When is a free cash flow model appropriate?

• 1) company has a history of dividend payments2) dividend policy is clear and related to the earnings of the firm3) perspective is that of a minority sharholders
• 1) firm's that do not have a dividend payment history or has a policy but it is not related to earnings2) free cash flow that corresponds with their profitability3) when valuation perspective is that of a controlling shareholder
• 1) difficult to implement for non-dividend payers
• accurately forecasting dividends for many periods

What is an advantage of using dividends in valuations?

• 1) dividends2) free cash flow3) residual income
• 1) dividends are less volatile than other measures
• 1) difficult to implement for non-dividend payers
• 1) Gordon growth2) market multiple approach

What are the three predominant definitions of future cash flow?

• 1) dividends2) free cash flow3) residual income
• 1) initial growth phase2) transition phase3) mature phase
• 1) dividends are less volatile than other measures
• = b X ROE where b = 1 - payout ratio