Expert Answer :Assets and CAPM Accounting

Solved by verified expert :CAPM Practice QuestionsI am completely stuck on the questions below, please help…..Question 1) In our real life, the value of assets cannot be estimated perfectly because we can’t be certain for the future cash flows that the asset generates and also we can’t be certain for the discount rate. Because of the uncertainty for the future cash flows and the discount rate, we cannot complete the balance sheet if we do have the income statement first.Can you explain how the uncertainty is related to earnings quality and how the uncertainty can be reduced?Question 2) Company A and Company B each have a $ 10,000 bond outstandingIf both companies’ bonds are due in ten years, what factors might make the bond market value the Company A bond at an amount greater than the Company B bond? If so, would Company A have a higher credit rating than Company B? If so, would the market rate of the Company A bond be higher than the market rate of the Company B bond (using the guidance in SFAC No. 7)?If both companies have the same credit rating, what factors might make the bond market value the Company A bond at an amount greater than the Company B bond (using the guidance in SFAC No 7)?I would like to confirm that my answers below are correct. Thank you!Question 3) In the market, what form of EMH has been generally supported?A) strongB) semistrongC) weakQuestion 4) Which one is false for the capital asset pricing model (CAPM)A) CAPM is based on the positive relation between risks and returnsB) CAPM can be used to forecast an unexpected return of individual securityC) CAPM assumes that only systematic risk is rewarded in the market, and unsystematic risk can be diversified by making portfolioD) CAPM is based on fundamental analysisQuestion 5) Which one is false?A) to measure the risk, CAPM assumes a possibility of mispricing in the marketB) the risk measure in CAPM is the betaC) the risk is measured based on the relation between market portfolio return and individual security returnD) a higher risk measure means that investors require more returnQuestion 6) What income measurement approach is comprehensive income based?A) traditional accounting transactions approachB) revenue recognition approachC) capital maintenance approachD) cash-based approachQuestion 7) Which one is false?A) IASB has no enforcement authority for company’s adoption of international accounting standardsB) FASB is not a member of IASBC) on Dec 17, 2003, IASB published the revised international accounting standardsD) to list their securities in the US markets, foreign companies must recast their financial statements based on either US GAAP or International Accounting StandardsQuestion 8) Which one is false?A) Agency theory is based on the assumption that a conflict of interest exists between the owners of a firm and the managersB) SFAS No 1 suggests that financial reporting should provide the information for the potential agency costs of the firmC) Generally companies’ agency costs are not controlled by companies themselvesD) The agency relation is defined as a relationship by consent between two parties, whereby one party agrees to act on behalf of the otherQuestion 9) Which one is not a main objective of financial reporting on SFAC 1?A) to provide information for assessing cash-flow prospectsB) to provide information for making investment and credit decisionsC) to provide information for evaluating management stewardship and peformanceD) to provide information for customer relationship managementQuestion 10) Which one is false?A) the fundamental analysis heavily depends on the accounting and financial informationB) the fundamental analysis is to find mispriced securities in the marketC) fundamental analysis is based on the efficient market hypothesis