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CVA – Certified Valuation Analyst

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Showing 4–6 of 15 questions

Question 4

The basic valuation model, which is central to the income approach to valuation, has only two variables. Which of the following is/are NOT out of those variables?

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    The amount of the expected prospective economic income in each period
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    The required rate of return (yield rate) by which the expected prospective economic income receipts should be discounted
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    Common equity
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    Economic income measured
Question 5

The advantages of the binomial model over the Black-Scholes model and its variations include:

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    The binomial model’s ability to incorporate a variety of conditions which can increase accuracy, including variations in expected volatility, dividends rates and risk-free discount rates as well as transaction costs.
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    The binomial model can be quite useful for valuing employee stock options as it is possible to include potential dilution, blackout periods, delayed vesting provisions, early exercise patterns and employee turnover in the model by increasing the number of periods and adjusting the
    option values at each node.
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    Binomial model does not require more computations
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    Binomial Model does not have any liquidity problem
Question 6

The sales comparison approach is based on the economic principles of:

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    Efficient markets
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    Special financing and other terms regarding each sales transactions
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    Age of each property
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    Supply and demand