Part I

For a company holding significant net financial assets $($NFA$),$ its risk in operation should be its equity risk; and its required rate of return of operation should be its required rate of return of equity.

A$.$ the same as $....$ the same as

B$.$ lower than $...$ lower than

C$.$ higher than $...$ higher than

D$.$ the same as $...$ higher than

Which one of the following statements is NOT correct?

A$.$ Stocks with high $\frac{P}{B}$ and high $\frac{P}{E}$ multiples are always overvalued by the market.

B$.$ Dividend Discounted Model can be used to value companies with stable payout policies.

C$.$ Share repurchase increases earnings per share, however it does not create more value for the shareholders than dividend.

D$.$ Method of comparables can be used to value private companies if a comparable public company can be identified.

If the United States Federal Reserve announces an increase of interest rate, what is the stock market reaction?

a$.$ up

b$.$ down

c$.$ no change