Equity Investments

Question 1

Price Continuity

Answer 1

Prices do not change from one transaction to the next unless substantial new information becomes available.

Question 2

Call Market

Answer 2

A market where all bids/asks are gathered to arrive at a single price where quantity demanded is close to quantity supplied.

Question 3

Asset-Based Valuation

Per Share

Answer 3

MV_Assets - MV_Liabilities

———————————

Outstanding Shares

Question 4

Beta

ß

Answer 4

Correlation * σ_A

————————

σ_B

Measure of risk to a benchmark. The covariance of a portfolio compared to the variance of a benchmark.

Question 5

Enterprise Value

EV

Answer 5

Market Capitalization

+ Debt

+ Preferred Stock

• Cash & Short Term Investments

Question 6

Intrinsic Value of Stock

Justified Forward P/E Approach

Answer 6

EPS₁ * E/P₁

or

EPS₁ * D_p / (k_ce - g)

Question 7

Prices do not change from one transaction to the next unless substantial new information becomes available.

Answer 7

Price Continuity

Question 8

A market where all bids/asks are gathered to arrive at a single price where quantity demanded is close to quantity supplied.

Answer 8

Call Market