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CMSA (EQUITY MARKET FUNDAMENTALS) EXAM QUESTIONS AND ANSWERS WITH COMPLETE SOLUTIONS VERIFIED GRADED A++
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CMSA (EQUITY MARKET FUNDAMENTALS) EXAM QUESTIONS AND ANSWERS WITH COMPLETE SOLUTIONS VERIFIED GRADED A++ What are the different types of asset classes from least risky to most? 1. Cash & Cash Equivalents 2. Fixed Income (Preferred Stock, Private Debt) 3. Equities 4. Alternative Investments...

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  • September 28, 2024
  • 18
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • cmsa equity market fundamentals exam questions a

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CMSA (EQUITY MARKET FUNDAMENTALS) EXAM

QUESTIONS AND ANSWERS WITH COMPLETE

SOLUTIONS VERIFIED GRADED A++



What are the different types of asset classes from least risky to most?

1. Cash & Cash Equivalents

2. Fixed Income (Preferred Stock, Private Debt)

3. Equities

4. Alternative Investments (Real Estate, Commodities)

Define Beta

Beta is the correlation of an asset's return profile relative to the markets returns; This

shows systematic risk and can't be reduced through diversification.

Define Levered Beta

Measured the systematic risk of a stock compared to the overall market while

accounting for the companies capital structure. AKA Equity Beta

Define Unlevered Beta

Measures the systematic risk of a company's assets without considering the effect of

the companies debt. Assumes the company is fully equity financed. AKA Asset Beta

Measures of Beta

,B>1 More volatile than the market (Tech Company)

B=1 Correlated with the market (Index Fund)

B=0 Uncorrelated with the market ($20 Bill)

0<B<1 Less Volatile than the market (Utility Company)

B<0 Negatively correlated with the market (Gold)

Define Adjusted Beta

A measure of a stocks risk that modifies the historical beta to reflect a tendency to move

towards the market beta of 1 over time

What is the Capital Stack?

List of corporate securities from least to most risky

1. Seinor Debt

2. Subordinated Debt

3. Hybrid (Dent with Warrants or Options)

4. Equity

4.a Shareholder Loans

4.b Preferred Shares

4.c Common Shares

Types of preferred stock

Convertible Preferred Stock - Option to convert to common shares



Cumulative Preferred Stock - Unpaid dividends are added to the next divided

, Participating Preferred Stock - Additional participation in the upside of the companies

earnings or liquidation proceeds beyond the fixed dividend.

Different types of Private Equity?

1. Private Equity Firms

2. Venture Capital Firms

3. Distressed Capital Firms

4. Private Real Estate Firms

What is the difference between Public Equity and Private Equity?

Public equity has higher liquidity

Private equity has lower liquidity



This means private equity has a higher expected return

What are the types of equity's?

1. Sectors of Industries (Financials; Materials; Gaming)

2. Equity Size (Small cap; Mid Cap; Large cap; Mega cap)

3. Type of Security ( Common, Preferred, Convertible)

4. Cyclicality (Cyclical, Defense, non-cyclical)

5. Investor Type (Growth, Value, Income)

6. Individual/Fund (Individual companies; ETF's; Mutual Funds)

Define Follow-On Offering

The issuance of additional shares by a company that is already publicly traded.

- Also known as a Secondary Offering

- Raises additional capital for the company

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