Certified Valuation Analyst (CVA) Practice Exam

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Prepare for the Certified Valuation Analyst (CVA) Test. Study with flashcards and multiple choice questions. Each question includes hints and explanations to help you get ready for your exam!

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Which of the following is NOT a factor that may impact company-specific risk?

Market Risk Premium
Company Performance
Industry Risk
General Equity Risk Premium

The correct answer is: General Equity Risk Premium

The choice indicating that the General Equity Risk Premium is not a factor that may impact company-specific risk is accurate because the General Equity Risk Premium reflects the overall expected return from equity over a risk-free rate, influencing market-wide returns rather than individual companies. This premium is tied to market conditions and investor sentiment, impacting all companies generally, rather than addressing the unique elements that affect a specific firm's risk profile. In contrast, factors like company performance, which measures an individual company’s operational success and profitability, and industry risk, which evaluates inherent risks associated with the specific sector in which a company operates, are directly related to company-specific risks. These factors can significantly influence the perceived risk and potential return of investing in a particular company, establishing a strong link between their performance and the industry context to the risks faced by the company itself.