QUESTION: 2161

Brad Kit, CFA, is analyzing the broadcasting industry. Kit has narrowed his analysis to Willow Corp. and Vision Inc.
Willow Corp. is a media company with a diversified group of leading TV, newspaper, and cable news operations. Revenues and earnings have grown slightly over the past ten years. The company's long-term debt to capital ratio is 40%. During the last recession, the company's earnings remained flat with the prior year. Still, Kit believes that Willow Corp. will have positive earnings surprises over the next several quarters, due to several new programs that have been hugely successful.
Vision Inc.'s operations are located in emerging markets with a high degree of political and regulatory risk. However, the TV, radio, and internet operations have the potential for extraordinary returns. Vision's stock is trading at 30 times next year's earnings and five times book value. A client asks Kit whether Willow Corp. is a growth company or growth stock and whether Vision Inc. is a speculative company or speculative stock. Kit's most appropriate response would be that:

Willow Corp. is a growth stock and Vision Inc. is a speculative stock.
Willow Corp. is a growth company and Vision Inc. is a speculative stock.
Willow Corp. is a growth stock and Vision Inc. is a speculative company.

Answer(s): C

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QUESTION: 2162

The following information is provided about Jacko Industries.
Using the method of average return on equity, Jacko's P/E ratio is closest to:

10.0
16.67
20.0

Answer(s): A

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QUESTION: 2163

An analyst has stated that, holding all else constant, an increase in the maturity of a coupon bond will increase its interest rate risk, and that a decrease in the coupon rate of a coupon bond will decrease its interest rate risk.
The analyst is correct:

only with respect to the effect of the increase in the maturity
only with respect to the effect of the decrease in the coupon rate
with respect to both the effect of the increase in maturity and the effect of the decrease in the coupon rate

Answer(s): A

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QUESTION: 2164

An analyst has been researching a possible investment in collateralized debt obligations (CDOs). Identify the statement which is most likely correct.

The underlying securities for a CDO are typically issued only by U.S.-based entities.
A CDO with corporate bonds as the underlying security is known as a collateralized loan obligation (CLO).
A CDO is typically structured into tranches, similar to a collateralized mortgage obligation (CMO).

Answer(s): C

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