CFA Practice Question

There are 57 practice questions for this study session.

CFA Practice Question

Select the correct statement(s):

I. The relative valuation approach is immune to market overvaluation.
II. With relative valuation models, one analyst may claim that a stock is undervalued while another one may claim the opposite. That is, the relative valuation approach is not objective.
Correct Answer: II is true

I. It is not immune to market valuation: If the comparison stock is overvalued, so might be the stock we are calling undervalued.
II. It is not objective as it is dependent on the choice of comparable companies which are chosen by the analyst.

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