NACVA CVA Exam - Topic 6 Question 115 Discussion

Actual exam question for NACVA's CVA exam

Question #: 115
Topic #: 6

The state of the art in the twenty-first century involves incorporating one or all of the following elements into the discount rate to reflect risk EXCEPT:

AA basic equity risk premium over the risk --free rate selected as the base

BOne or more coefficients modifying the basic equity risk premium based on industry or other characteristics that are expected to affect the degree of risk for the subject investment

CAn element reflecting the size effect

DNone of these

Show Suggested Answer

Suggested Answer: D

by Percy at Aug 18, 2025, 12:28 AM

Limited Time Offer

25%

Off

Get Premium CVA Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Roxanne

7 months ago

Isn't it surprising how much these factors can vary by industry?

upvoted 0 times

...

Colene

7 months ago

I think the coefficients are essential for accurate risk assessment.

upvoted 0 times

...

Moon

7 months ago

Wait, are we really saying none of these? That seems off.

upvoted 0 times

...

Louis

7 months ago

I agree, size effect is also a common factor.

upvoted 0 times

...

Clement

8 months ago

A basic equity risk premium is definitely included in the discount rate.

upvoted 0 times

...

Geoffrey

8 months ago

I’m leaning towards D, "None of these," because it seems like all the options listed are relevant to risk assessment in discount rates.

upvoted 0 times

...

Anissa

8 months ago

I feel like we had a practice question about modifying the risk premium based on industry specifics, which makes me think B is definitely a valid component.

upvoted 0 times

...

Ardella

9 months ago

I’m not entirely sure, but I think the size effect is sometimes considered a separate factor rather than part of the discount rate itself.

upvoted 0 times

...

Selma

9 months ago

I remember we discussed how the equity risk premium is a standard part of the discount rate, so A seems like something that should be included.

upvoted 0 times

...

Angella

9 months ago

I'm a bit confused by the wording of this question. I'll need to take my time and make sure I understand what it's asking before selecting an answer.

upvoted 0 times

...

Derick

9 months ago

I've seen questions like this before, so I'm feeling confident. I'll just need to make sure I read each answer choice closely.

upvoted 0 times

...

Natalie

9 months ago

Okay, let me think this through step-by-step. The question is asking which element is NOT used to reflect risk in the discount rate. I'll need to carefully consider each option.

upvoted 0 times

...

Glenn

10 months ago

Hmm, I'm not sure I fully understand the concept of the discount rate and how these elements are supposed to reflect risk. I'll need to review my notes.

upvoted 0 times

...

Heike

10 months ago

This question seems straightforward, I think I can handle it.

upvoted 0 times

...

Hildred

10 months ago

I'm not sure, I think it might be C) An element reflecting the size effect.

upvoted 0 times

...

Lorrie

10 months ago

D. None of these? Really? I'm pretty sure incorporating all of those elements is the state of the art in the 21st century. This question is a bit too easy, don't you think?

upvoted 0 times

Amie

6 months ago

Right? It's like they want us to overthink it.

upvoted 0 times

...

Ocie

7 months ago

I can't believe D is even an option!

upvoted 0 times

...

Kaycee

7 months ago

Definitely! All those elements are crucial.

upvoted 0 times

...

Oretha

8 months ago

I agree, it seems too straightforward.

upvoted 0 times

...

Leigha

11 months ago

I agree with Dion, because all the other options involve incorporating risk elements into the discount rate.

upvoted 0 times

...

Gracia

11 months ago

I think the answer is B. Incorporating coefficients to modify the basic equity risk premium based on industry or other characteristics is a common way to reflect risk in the discount rate.

upvoted 0 times

Luther

10 months ago

I think it's actually C, reflecting the size effect in the discount rate.

upvoted 0 times

...

Javier

10 months ago

I agree, incorporating coefficients based on industry characteristics is important.

upvoted 0 times

...

Dion

12 months ago

I think the answer is D) None of these.

upvoted 0 times

...