NACVA NACVA Certifications CVA Questions & Answers

• Question 191:

  The special characteristics of the preferred stock that we typically encounter include all of the following EXCEPT:

  A. Dividend rate

  B. Liquidation preference

  C. Cumulative versus noncumulative dividends

  D. Convertible versus nonconvertible rights into preferred equity

  Correct Answer: D

• Question 192:

  An interesting form of debt security, known as _________________, allows the issuer to avoid paying cash to the debt holder for interest prior to the debt's maturity. The only cash payment from the debt issuer comes at maturity, when the debt's face value is repaid to security holder.

  A. Callable bonds

  B. Zero coupon debt

  C. Convertible debt

  D. Collateral provisions

  Correct Answer: B

• Question 193:

  Factors affecting the value of preferred stock are all of the following EXCEPT:

  A. Stated dividend rate and the risk associated with payment of it

  B. Cumulative versus noncumulative dividends

  C. Lack of marketability discount

  D. Redemption privilege

  Correct Answer: C

• Question 194:

  If a $1000 per share value of convertible bond is issued for $1000, and is convertible into 20 shares of issuer's common stock that pays no dividend, there will be no economic benefit in converting the debt to stock as long as the common stock is selling for:

  A. Less than $50 per share

  B. $50 per share

  C. $more than $50 per share

  D. Less than $25 per share

  Correct Answer: A

• Question 195:

  Qualitative factors might also cause the required yield to be higher or lower than that based solely on the quantitative ratio analysis. Whish of the following is NOT out of such quantitative factors?

  A. The competitive environment in the industry

  B. Depth and competence of management

  C. Trends in diversification of revenue sources

  D. Trends in diversification of strategies

  Correct Answer: D

• Question 196:

  ____________________ are defined as the sum of the market value of total liabilities divide by the aggregate liquidation value of the preferred stock.

  A. Liquidation Coverage ratio

  B. Pretax return on total capital

  C. Capitalization ratio

  D. Fixed charge coverage

  Correct Answer: A

• Question 197:

  The rate of interest that, when applied to the expected future payments equal to the debt security's observed market price is called the:

  A. Yield to maturity

  B. Return on investment

  C. Market interest

  D. Interest earning

  Correct Answer: A

• Question 198:

  Which of the following is NOT the advantage of leasing to the lessee?

  A. The financing terms of the lease usually take into considerations the lessor's ability to more efficiently use the tax advantages of asset ownership

  B. Most leases are short-term operating leases, and that reduces the transaction costs (i.e. identifying qualified buyers and complications associated with equipment obsolescence) at the end of anticipated period of use

  C. Installment sales agreements

  D. There is less of a capital commitment so that equity and borrowing power are freed for the other financing

  Correct Answer: C

• Question 199:

  Recapitalizations involving debt securities may be undertaken for a variety of reasons. One common reason is:

  A. A leveraged Buyout

  B. A leveraged recapitalization

  C. Bankruptcy recapitalization

  D. Resource reallocation

  Correct Answer: B

• Question 200:

  Most typically, a company, or some or all of its stock, is to be sold and a debt security received as all or part of the consideration. The seller needs to know the cash-equivalent value of the consideration being received in return for the company or stock being given up. It is uncommon for notes or other debt securities issued in connection with the acquisition of a company to have a cash equivalent value of ___________________ the securities value.

  A. 20 percent of

  B. 20 percent more or below

  C. 20 more than

  D. 20 percent below

  Correct Answer: B