Peer Group Analysis Can Be Performed by

question 26

Multiple Choice

Peer group analysis can be performed by

• A) management choosing a set of companies that are similar in size or sales, or who compete in the same market.
• B) using the average ratios of this peer group, which would then be used as the benchmark.
• C) identifying companies in the same industry that are grouped by size, sales, and product lines in order to establish benchmark ratios.
• D) Only a and b relate to peer group analysis.

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Definitions:

Zero-Coupon Bond

A bond that does not pay interest during its life but is sold at a discount and pays its full face value at maturity.

Forward Rate

An interest rate applicable to a financial transaction that will take place in the future.

Yield To Maturity

The total return anticipated on a bond if held until it matures, considering all interest payments and the capital gain or loss.

Reinvestment Assumption

The assumption in financial planning or analysis that all cash flows or dividends will be reinvested to generate additional returns.