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CFA Level I · CFA Level I Exam · Equity Analyst Research Reports

An equity analyst's research report contains a recommendation, a valuation and a discussion of risks. Which element of the report most likely allows readers to judge whether the recommendation is reliable?

A clear statement of the assumptions and valuation methods behind the price target lets readers test the reasoning and judge reliability. Biographical details or summary length reveal nothing about whether the analysis is sound or the recommendation is supported.

  1. AThe analyst's biography and photograph
  2. BA clear statement of the assumptions and valuation methods behind the price targetCorrect
  3. CThe length of the executive summary

Explanation

Reliability depends on whether the reader can see and test the inputs, assumptions and methods that produce the target price. A biography or a long summary says nothing about the soundness of the analysis.

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