CFA Level 1 Exam Question Banks 2024, Chartered Financial Analyst

Question #1

Standard IV (B.3) - Fair Dealing requires AIMR members to treat all clients and prospects fairly when disseminating investment information or recommendation. Which of the following is/are implied by this?

A. ll clients and prospects must be treated equally i

B. and II only

C. I and III only

D. I only

E. , II and III

View answer

Correct Answer: C

Question #2

If you deposit $345 into an account paying 5.45% per year simple interest, how much interest will be earned after 10 months?

A. 15

B. 360

C. 188

D. $359

E. 14

View answer

Correct Answer: A

Question #3

The prevailing budget philosophy prior to Keynes called for a balanced budget. Keynes argued that the government's tax and spending policies should be determined by the

A. emand requirements necessary to attain full employment of resources

B. ublic's willingness to accept or reject tax changes

C. ize and quality of the labor force

D. emand for public goods

View answer

Correct Answer: D

Question #4

The section of a firm's annual report entitled "Management's Discussion and Analysis" (MD&A)

A. s a technical analysis of past results and a defense of those results of management

B. ncludes the company president's letter

C. overs three financial aspects of a firm's business: liquidity, capital resources, and results of operations

D. overs marketing and product line issues

E. one of these answers

View answer

Correct Answer: C

Question #5

For a one-tailed hypothesis test, the critical value of the test statistic is -2.33. Which of the following is true about the hypothesis test?

A. lpha =

B. lpha =

C. lpha =

D. lpha =

E. one of these answers

View answer

Correct Answer: D

Question #6

The current price of a $1,000 par value, 6-year, 4.2% semiannual coupon bond is $958.97. The bond's PVBP is closest to:

A. 0

B. 4

C. 5

View answer

Correct Answer: A

Question #7

Built-in features that tend to promote a budget deficit during a recession and a budget surplus during an inflationary boom are known as ________.

A. utomatic stabilizers

B. ounter-cyclical policies

C. ctive budget deficits

D. estrictive fiscal policies

View answer

Correct Answer: A

Question #8

In a management trainee program, 80 percent of the trainees are female, 20 percent male. Ninety percent of the females attended college, 78 percent of the males attended college. A management trainee is selected at random. What is the probability that the person selected is a female who did not attend college?

A.

B.

C.

D.

E. one of these answers

View answer

Correct Answer: D

Question #9

Use the following financial data on Enterprise:

A. ale of equipment$32,000

B. oss on equipment sale$9,000

C. ividends paid$12,500

D. urchase of an office suite$104,000

E. ommon stock repurchase$45,000

F. ividends received from investments$8,500

View answer

Correct Answer: B

Question #10

If you deposit $250 a month, beginning next month, for 20 years into an account paying 7% per year, compounded monthly, how much is in your account after that last deposit?

A. 58,205

B. 308,663

C. 148,833

D. 147,577

E. 130,231

View answer

Correct Answer: E

Question #11

Which of the following answers is false in reference to confidence levels and/or tests of significance? Choose the best answer.

A. ll else equal, the confidence interval for a test with a 5% significance level is larger than the confidence interval for a test with a 1% significance level

B. he Greek letter alpha is used to denote the probability of a Type I error

C. he significance level used in hypothesis testing is typically 0

D. n most hypothesis testing, the power of a test is equal to (1 - the significance level)

E. he confidence level can be found by (1 - alpha)

F. ore than one of these answers is false

View answer

Correct Answer: A

Question #12

Past experience of a large manufacturing firm with administering a test to recent college graduates who had applied for a job revealed that the mean test score was 500, and the standard deviation was 50. The distribution of the test scores was normal. Based on this experience, management is considering placing a person whose scores is in the upper 6 percent of the distribution directly into a responsible position. What is the lowest score a college graduate must earn to qualify for a responsible position?

A. one of these answers

B. 60

C. 25

D. 78

E. 0

View answer

Correct Answer: D

Question #13

If the net cash inflow = $12,000, Investing cash flow = $(4,000) and operating cash flow = $7,000, the financing cash flow equals ________.

A. 9,000

B. 23,000

C. 15,000

D. 12,000

View answer

Correct Answer: A

Question #14

Misrepresentation of performance is prohibited by section ________ of the Standards of Professional Conduct.

A. II (A)

B. I (E)

C. II (F)

D. V (E)

E. (B)

View answer

Correct Answer: E

Question #15

Level ________ verification applies to the firm.

A. V

B.

C.

D. I

E. II

View answer

Correct Answer: C

Question #16

The following information should be used according to the provisions of SFAS 95 (Statement of Cash flows) and using the following data.Net Income $50,000Provision for bad debts $2,000Increase in Inventory $1,000Increase in accounts payable $2,000Purchase of new equipment $15,000Sale of equipment for $10,000 gain $20,000Depreciation expense $5,000Repurchase of common stock $10,000Payment of dividend $4,000Interest payment $3,000What is net cash flow from investing?

A. 10,000

B. $15,000)

C. $5,000)

D. 5,000

View answer

Correct Answer: D

Question #17

The following stock market return data were observed last year:Returns# of stocksless than -5% 129between -5% and 0% 301between 0% and 10% 636between 10% and 20% 274more than 20% 173The probability that a randomly selected stock had either a negative return or a return more than 20% equals ________.

A.

B.

C.

D.

View answer

Correct Answer: D

Question #18

A light bulb manufacturer would like to supply only those bulbs which have a life of 2,000 hours or more. Otherwise, it wants the bulbs to be rejected at the assembly line. The statistician hired by the bulb manufacturer is trying to frame the situation as a hypothesis testing problem. He should specify the null and alternate hypothesis as:

A. o: average life < 2,000; H1: average life > 2,000

B. o: average life = 2,000; H1: average life > 2,000

C. o: average life = 2,000; H1: average life < 2,000

D. o: average life >= 2,000; H1: average life < 2,000

View answer

Correct Answer: D

Question #19

Which of the following is/are true about trading securities?

A. hey are current assets

B. only

C. I & III

D. , II & III

E. & II

View answer

Correct Answer: D

Question #20

Standard III (D) is ________.

A. one of these answers

B. isclosure of Additional Compensation Arrangements

C. isclosure of Conflicts to Employer

D. bligation to Inform Employer of Code and Standards

E. uty to Employer

F. esponsibilities of Supervisors

View answer

Correct Answer: B

Question #21

Corporate directors are governed by the ________. Trustees are governed by the ________.

A. one of these answers

B. common sense doctrine"; business judgment rule

C. usiness judgment rule; Prudent Man Rule

D. usiness judgment rule; "common sense doctrine"

E. common sense doctrine"; Prudent Man Rule

F. rudent Man Rule; business judgment rule

View answer

Correct Answer: C

Question #22

Jorge FuIIen is evaluating a 7% 10-year bond that is callable at par in 5 years. Coupon payments can be reinvested at an annual rate of 7%, and the current price of the bond is $106.50. The bond pays interest semiannually. Should Fullen consider the yield to first call (YTC) or the yield to maturity (YTM) in making his purchase decision?

A. TM, since YTM is greater than YTC

B. TC, since YTC is less than YTM

C. TC, since YTC is greater than YTM

View answer

Correct Answer: B

Question #23

The sponsors of a well-known charity came up with a unique idea to attract wealthy patrons to the $500 a plate dinner. After the dinner, it was announced that each patron attending could buy a set of 20 tickets for the gaming tables. The chance of winning a prize for each of the 20 plays is 50-50. If you bought a set of 20 tickets, what is the chance that you will win 15 or more prizes?

A.

B.

C.

D. one of these answers

E.

View answer

Correct Answer: A

Question #24

Which of the following is /are true?

A. ultiplying every value in a distribution by 2 will double the sample variance

B. , II & III

C. only

D. I only

E. II only

F. & III

View answer

Correct Answer: C

Question #25

An automatic machine inserts mixed vegetables into a plastic bag. Past experience revealed that some packages were underweight and some were overweight, but most of them had satisfactory weight.Weight % of TotalUnderweight 2.5Satisfactory 90.0Overweight 7.5Three packages are selected from the food processing line. What is the probability of selecting and finding that all three of them are underweight?

A. one of these answers

B.

C.

D.

E.

View answer

Correct Answer: D

Question #26

Mrs. Davis was in the habit of keeping $500 in currency in her jewelry chest in case she ever needed cash and the bank was closed. However, she recently got a combination debit/ATM card that gives her access to her checking account 24 hours a day. She deposits her $500 in cash into her checking account. How does this immediately impact the monetary base and the effective amount money available for transactions?

A. ecrease, increase

B. ncrease, decrease

C. o change, decrease

D. oth increase

E. o change for either

F. ecrease, no change

View answer

Correct Answer: F

Question #27

Which of the following statements about directors of a company is true?

A. irectors only get paid if the company increases its profitability that year

B. ll directors of a company are senior managers in that company

C. irectors are shareholders' representatives

D. irectors are elected by management of a company

View answer

Correct Answer: C

Question #28

Manufacturers were subdivided into groups by volume of sales. Those with more than $100 million in sales were classified as Class A large; those from $50 to $100 million as Class A medium size; and those between $25 and $50 million, and so on. Samples were then selected from each of these groups. What is this type of sampling called?

A. tratified random

B. imple random

C. onvenience

D. one of these answers

E. anel

View answer

Correct Answer: A

Question #29

If restrictive monetary policy results in a deceleration in the domestic inflation rate and higher real interest rates, other things constant, the

A. ation will run a current account surplus

B. ation's currency will appreciate

C. ation will run a capital account deficit

D. ation will run a balance of trade surplus

E. ation's currency will depreciate

View answer

Correct Answer: B

Question #30

Michelle Garcia, CFA, is analyzing two newly issued corporate debt securities for possible purchase by a client. Bond X is a noncallable 10-year coupon bond currently trading at 102.50. Bond Y is a noncallable 10-year coupon bond currently trading at 98.25. Garcia wants to ensure that her client is fully aware of any probable changes in the bonds' values as they approach maturity. Holding interest rates constant, which of the following best describes how each bond's price will change as it approaches maturi

A. he price of both bonds will decrease

B. he price of Bond X will decrease, and the price of Bond Y will increase

C. he price of Bond X will increase, and the price of Bond Y will decrease

View answer

Correct Answer: B

Question #31

Which of the following is/are true?

A. traight preferred equity holders to do not have a right to demand redemption

B. & IV

C. , II, III & IV

D. , II & III

E. I, III & IV

View answer

Correct Answer: B

Question #32

The following is a sign that a company is a "growth company":

A. t has no earnings and does not pay a dividend

B. t has very strong negative cash flows and borrows heavily to make up for the negative cash flows

C. t has earnings but does not pay dividends and its employees are not overly compensated

D. t has earnings and pays out large dividends

View answer

Correct Answer: C

Question #33

A firm has entered into a long-term purchase obligation. This will allow the firm to obtain raw materials for operations at a known price over the next 6 years. This obligation must be reflected on the balance sheet as:

A. current liability until the first purchase occurs

B. footnote disclosure

C. one of these answers

D. long-term liability

View answer

Correct Answer: B

Question #34

A sample of size 100 is drawn from a population. The sample mean equals 35.2 and the variance of the sample equals 47.8. The 95% confidence interval for the population mean is given by:

A. 33

B. 35

C. 35

D. 33

View answer

Correct Answer: D

Question #35

An investor has a required rate of return of 5% per year. How much will he pay for a seven-year ordinary annuity that pays $200 per year?

A. 1,093

B. 1,157

C. 1,215

D. 1,213

View answer

Correct Answer: B

Question #36

Standard IV (B) is known as ________.

A. reservation of Confidentiality

B. uty to Employer

C. rofessional Misconduct

D. rohibition against Use of Material Nonpublic Information

E. nteractions with Clients and Prospects

F. nvestment Process

View answer

Correct Answer: E

Question #37

The exchange rate of a country's currency will ________ if the income of the country and its trading partners rises.

A. either of these answers

B. ncrease

C. his answer depends on which income rises the fastest: for countries that are similar in size and propensity to import, the country that is growing the fastest will increase its demand for imports relatively more than its trading partner, resulting in a decrease in the value of the more rapidly growing nation's currency

D. ecrease

View answer

Correct Answer: C

Question #38

When financial statements are presented that are not in conformity with generally accepted accounting principles, an auditor may express a Qualified Opinion Disclaimer of an OpinionQualified Opinion Disclaimer of an Opinion

A. es NoII

B. I

C. II

D.

E. V

View answer

Correct Answer: C

Question #39

The allowance for uncollectible accounts is based on all of the following except:

A. xperience

B. rofitability expectancy

C. ustomer fortunes

D. ndustry expectations

View answer

Correct Answer: B

Question #40

Which of the following statements is true?

A. llocation of plant asset costs, through depreciation, if consistently applied, does not lend itself to serious distortion

B. one of these answers

C. ll of these answers

D. etermination of the useful life of an asset, if consistently applied, does not lend itself to serious distortion

E. istorical cost valuation of plant assets, if consistently applied, does not lend itself to serious distortion

View answer

Correct Answer: E

Question #41

If a broad increase in the price of stocks causes an increase in the real wealth of individuals, then the

A. ggregate demand curve will shift to the left

B. ggregate demand curve will shift to the right

C. eneral price level will fall

D. ggregate quantity demanded must rise

View answer

Correct Answer: B

Question #42

Standard IV (B.7) deals with ________.

A. riority of Transactions

B. one of these answers

C. isclosure of Referral Fees

D. erformance Presentation

E. rohibition against Misrepresentation

F. isclosure of Conflicts to Clients and Prospects

View answer

Correct Answer: F

Question #43

If every one of your research reports had a statement stating that every research report on issues by a corporate client reflects the unbiased opinion of the analyst, you would be complying with Standard ________.

A. V (3)

B. V (A

C. V (A

D. I (A)

E. I (C)

F. I (B)

View answer

Correct Answer: A

Question #44

A Consolidated Statement of Stockholders' Equity could have all of the following, except

A. umber of shares of cumulative, callable preferred shares

B. nrealized gains and losses on securities

C. he cumulative effect of exchange rate changes

D. he book value of redeemable preferred stock

E. he change in reinvested earnings

View answer

Correct Answer: D

Question #45

Which of the following would most likely cause a nation's currency to appreciate?

A. n increase in real interest rates abroad

B. n increase in inflation of the nation's trading partners

C. n increase in the nation's domestic inflation rate

D. decrease in domestic real interest rates

View answer

Correct Answer: B

Question #46

According to the Standards of Practice Handbook, how frequently should managers gather information on clientcircumstances, occupation, investment objectives and risk tolerances?

A. t least monthly

B. t least annually

C. t least every two years

D. t least every five years

View answer

Correct Answer: B

Question #47

What is the annual Internal Rate of Return of this series of annual cash flows: Year 0: <$4,000>, Year 1:$2,000, Year 2: $0, Year 3: $0, Year 4 number).

A. 4

B. 5

C. 1

D. 5

E. 2

View answer

Correct Answer: B

Question #48

If an independent auditor has not become satisfied by means of other auditing procedures with respect to opening inventories, they should

A. ither disclaim an opinion on the statement of income or qualify the opinion thereon, regardless of the degree of materiality of the amounts involved

B. ither disclaim an opinion on the statement of income or qualify the opinion thereon, depending on the degree of materiality of the amounts involved

C. isclaim an opinion or qualify the opinion on the statements as a whole

D. xpress an adverse opinion on the statements taken as a whole when the amount in question is material

View answer

Correct Answer: B

Question #49

Access or covered persons are discussed in detail under which of the following standards?

A. rohibition against Plagiarism

B. esponsibilities of Supervisors

C. one of these answers

D. riority of Transactions

E. undamental Responsibilities

F. rofessional Misconduct

View answer

Correct Answer: D

Question #50

Paul Erdosh is an independent contractor who was hired by Arbitrage Securities to carry out a research project involving the software industry. The scope of the research was broad and the aim was to identify relatively undervalued stocks in that sector. During the course of the research, Paul realized that two of the companies in the sector were prime takeover targets if anyone bothered to do more research on them. He decided to sell this finding to M&A Consultants and obtain a research contract from them.

A. ot violated Standard III (B) - Duty to Employer

B. iolated Standard III (B) - Duty to Employer - because by selling the information to a rival firm, he has potentially harmed Arbitrage Securities' business

C. ot violated Standard III (B) - Duty to Employer - because he is an independent contractor, not an employee of Arbitrage Securities

D. iolated Standard III (B) - Duty to Employer

View answer

Correct Answer: A

Question #51

Giovanni DiPaglia is VP of strategic planning for Megaquistion Holdings, a global conglomerate active in the mergers and acquisition market. DiPaglia is looking to invest in a new portfolio company for Megaquistion, and has selected Temptytarg, Inc. as a potential candidate. He has gathered the following information for Temptytarg, Inc.Price/Book Value (P/BV) for Temptytarg is closest to:

A.

B.

C.

View answer

Correct Answer: C

Question #52

A supervisor complies with Standard III (E) by establishing and enforcing ________ to prevent violations.

A. egal requirements

B. iduciary duties

C. one of these answers

D. ode of ethics

E. ompliance procedures

View answer

Correct Answer: E

Question #53

Suppose you need $1,500 in 15 months. How much must you deposit today, if the deposit will earn interest at 8% per year, compounded monthly?

A. 472

B. 1,249

C. 1,357

D. 291

E. 341

View answer

Correct Answer: C

Question #54

According to the AIMR-PPS, composites must be asset weighted using

A. nd-of-period weightings

B. iddle-of-period weightings

C. erformance-period weightings

D. eginning-of-period weightings

View answer

Correct Answer: D

Question #55

Which of the following investments in debt securities would not normally be classified as long-term?

A. eld-to-maturity securities

B. rading securities

C. vailable-for-sale securities

D. ll of these answers

E. one of these answers

View answer

Correct Answer: B

Question #56

Suppose we set the criterion for the rejection of the null that is extremely lax, assuring us that the null will not be rejected. Then, which of the following is/are true?

A. he probability of a Type I error is zero

B. & III

C. I only

D. I & III

E. one of these answers

F. only

View answer

Correct Answer: E

Question #57

If you owe 3 debts ($800 due 3 months from now, $900 due 7 months from now, and $1,200 due 11 months from now), what single payment can you make today to settle them, if interest is assessed at 10% per year, compounded monthly?

A. 2,387

B. 2,600

C. 3,552

D. 2,724

E. 2,504

View answer

Correct Answer: D

Question #58

A firm had an operating cash flow of 4,500, financing cash flow of 1,200 and an investing cash flow of -900. The firm has announced common stock dividends of 45 and preferred stock dividends of 23. If the outlays for maintenance of current capacity is 310, the firm's free cash flow equals ________.

A. ,445

B. ,345

C. ,122

D. ,145

View answer

Correct Answer: C

Question #59

Larry Rile is evaluating the investment merits of Bing Corp., a successful motorcycle manufacturer. Rile is forecasting a dividend in year I of $1.50 per share, a dividend in year 2 of $3.00 per share, and a dividend in year 3 of 4.50 per share. After year 3, Rile expects dividends to grow at the rate of 6% per year. Rile calculated a beta of 1.3 for Bing Corp. Rile expects the S&P 500 index to return 8%. The U.S. Treasury bill is yielding 2%. Using the multistage dividend discount model, what is Bing Corp.

A. 92 per share

B. 102 per share

C. 112 per share

View answer

Correct Answer: B

Question #60

Increasing which factor in the dividend discount model, without changing the other two, would be least likely to increase a stock's price-to-earnings (P/E) ratio?

A. he expected dividend payout ratio

B. he required rate of return on the stock

C. he expected constant growth rate of dividends

View answer

Correct Answer: B

Question #61

If the underlying theory suggests that the value of an estimated variable is less than a particular number, it is appropriate to use:

A. right-tailed test

B. left-tailed test

C. two-tailed test

D. ither a right-tailed or left-tailed test

View answer

Correct Answer: B

Question #62

Regarding beneficiaries and remaindermen, current life-income beneficiaries prefer to receive ________; remaindermen would rather have ________.

A. minimal current income; a high rate of current income

B. high rate of current income; growth and stability of principal

C. rowth and stability of principal; a high rate of current income

D. mall incremental principal repayments; predictable current income

E. one of these answers

View answer

Correct Answer: B

Question #63

Keynesians believe that a discretionary fiscal policy:

A. s destabilizing due to difficulty in timing and should not be used actively

B. s ineffective since people rationally anticipate its future effects

C. one of these answers

D. s not as effective as the monetary policy in controlling unemployment

View answer

Correct Answer: C

Question #64

Standard V (A) is known as ________.

A. rohibition against Use of Material Nonpublic Information

B. uty to Employer

C. reservation of Confidentiality

D. nteractions with Clients and Prospects

E. one of these answers

F. nvestment Process

View answer

Correct Answer: A

Question #65

Jeff Stone, CFA, is evaluating a newly issued mortgage backed security for his bond portfolio. Stone expects interest rates to rise gradually over the next few years. If Stone's interest rate forecast is correct, prepayment risk of the mortgage backed security:

A. ill fall to zero, as borrowers will have no incentive to prepay their loans

B. ill increase, as curtailments become more likely

C. ill decrease, although prepayments will still occur

View answer

Correct Answer: C

Question #66

When purchased, plant assets are recorded at:

A. ost

B. arket value

C. uture value

D. ower of cost or market

View answer

Correct Answer: A

Question #67

The phrase, "GDP equals what you eat plus what you invest plus what you export" characterizes which of the following methods?

A. xpenditure approach

B. ncome-cost approach

C. onsumption-investment approach

D. esource cost-income approach

View answer

Correct Answer: A

Question #68

Which of the following would have an effect on cash flow from operations?

A. ale of machinery for $50,000 with a net book value of $35,000

B. , II and III

C. , III and IV

D. II and IV

E. and III

View answer

Correct Answer: C

Question #69

Standard IV (B.5) deals with ________.

A. isclosure of Conflicts to Clients and Prospects

B. rohibition against Use of Material Nonpublic Information

C. one of these answers

D. reservation of Confidentiality

E. rohibition against Misrepresentation

F. riority of Transactions

View answer

Correct Answer: D

Question #70

If a company changes the useful life of its assets from 10 years to 12 years, this will be recorded as ________.

A. non recurring gain

B. change in accounting principle

C. n extraordinary item

D. one of these answers

View answer

Correct Answer: D

Question #71

Amartya is currently managing the investment fund for a charitable institution and has his fiduciary duties bound by the UMIFA (Uniform Management of Institutional Funds) rules. His colleague, Bhagwati, is a trustee of a personal trust fund set up by the late R. D. Tata, a famous industrialist. Which of the following is/are true about this situation?

A. martya\'s behavior as a trustee is governed by the "Prudent Man Rule

B. II only

C. and II only

D. , II and III

E. only

View answer

Correct Answer: A

Question #72

All of the following are attributes of depreciation except

A. epreciation stays on the balance sheet as long as the asset is owned by the corporation

B. epreciation provides funds for replacement of an asset

C. epreciation is allocation of the cost of an asset over its useful life

D. he purpose of depreciation is to charge against operations, by means of allocation, the cost of an asset

View answer

Correct Answer: B

Question #73

Firm A issues convertible bonds to raise capital in the amount of a million dollars. An identical Firm B issues debt with warrants attached to raise the same amount. Which of the following statements is/are true in this situation?

A. irm A ignores the convertibility feature completely while recording the bonds

B. , II & III

C. I & III

D. only

E. I only

View answer

Correct Answer: A

Question #74

What single deposit could you make today in order to have $500,000 in 30 years, assuming it earns interest at 9% per year, compounded monthly?

A. 19,423

B. 215,024

C. 23,682

D. 33,943

E. 53,512

View answer

Correct Answer: D

Question #75

Under a monetary expansion, aggregate demand can be expected to ________.

A. tay the same

B. ise

C. all, then rise

D. all

E. ise, then fall

View answer

Correct Answer: B

Question #76

An analysis of the grades on the first test in History 101 revealed that they approximate a normal curve with a mean of 75 and a standard deviation of 8. The instructor wants to award the grade of A to the upper 10 percent of the test grades. What is the dividing point between an A and a B grade?

A. 0

B. 0

C. 5

D. 5

E. one of these answers

View answer

Correct Answer: C

Question #77

Which of the following will most likely occur in the short run when the long-run equilibrium of an economy is disturbed by an unanticipated decrease in aggregate demand?

A. n increase in output and a lower price level

B. decrease in output and a higher price level

C. n increase in output while prices remain unchanged

D. decrease in output and a lower price level

View answer

Correct Answer: D

Question #78

If you owe a debt of $1,000 today and also owe $500 in 24 months, what single payment could you make 12 months from today that would pay off both of these debts, if interest is assessed at 8% per year, compounded monthly?

A. 751

B. 1,426

C. 1,500

D. 1,544

E. 2,041

View answer

Correct Answer: D

Question #79

The results of the regressions using 200 observation on a variable Y against X are as follows:Coefficient Standard errorintercept 3.62.1slope 8.11.3R square = 49%The regression equation can be expressed as:

A. = 3

B. = 8

C. = 8

D. = 3

View answer

Correct Answer: A

Question #80

James Volley, CFA, is evaluating a number of municipal bonds. One of the revenue bonds on his list is marked as "prercfunded." When Volley asks his assistant about the bonds, the assistant tells him that the collateral behind the bonds is a portfolio of U.S. government securities, and that, therefore, these bonds have "less credit risk than insured municipal bonds." Which of the following statements regarding these bonds is most accurate"?

A. he bonds do indeed have less credit risk than insured municipal bonds

B. nly general obligation bonds can be prerefunded, not revenue bonds

C. rerefunded bonds are secured by a cash escrow account, not by US government securities

View answer

Correct Answer: A

Question #81

Maria Golino is a financially savvy client of Hector Gomez, a portfolio manager with a small investment firm. Maria recently directed Hector to execute all trades on her behalf with Omega Brokerage. Omega charges higher commissions than most other brokerage firms but in this case, has agreed to provide research to Hector on behalf of Maria. Hector does not object to this and starts directing Maria's trades to Omega. Hector has

A. iolated Standard IV (B

B. iolated Standard IV (A

C. iolated Standard IV (B

D. ot violated any standards

View answer

Correct Answer: D

Question #82

Which of the following would occur prior to the completion of a long-term contract when using the completed- contract method as opposed to the percentage-of-completion method?

A. firm's current period income tax liability would be lowered

B. firm's current period profits would be greater

C. one of these answers

D. ll of these answers

E. firm's current period revenues would be greater

View answer

Correct Answer: A

Question #83

Call options on the stock of Verdant, Inc., with a strike price of $45 are priced at $3.75. Put options with a strike price of $45 are priced at $3.00. Which of the following most accurately describes the potential payoffs for owners of these options (assuming no underlying positions in Verdant)?

A. he call writer has the maximum loss exposure

B. he put buyer has the maximum loss exposure

C. he put writer has the maximum potential gain

View answer

Correct Answer: A

Question #84

ERISA fiduciaries must adhere to the following prudent procedures:- establish a written investment policy for the plan- diversify plan assets- make investment decisions with the skill and care of a ________- monitor investment performance- control investment expenses- avoid prohibited transactions

A. ember

B. upervisor

C. rudent expert

D. one of these answers

E. rader

View answer

Correct Answer: C

Question #85

Mr. Brown was in the habit of cashing his weekly paycheck and using this cash for his daily expenses. However, he now gets his paycheck direct deposited into his checking account and uses a debit card exclusively instead of cash. This represents an increase in which of the following types of money demand for Mr. Brown?

A. ransactions demand

B. lectronic demand

C. peculative demand

D. tore-of-wealth demand

E. ll of these answers are correct

F. one of these answers is correct

View answer

Correct Answer: F

Question #86

Under the null hypothesis, Ho, x = y. Under the alternative hypothesis, x does not equal y. If the critical z- statistic for the desired significance level is 1.68 and you find the z-statistic to be -3.2, you should:

A. eject the alternative hypothesis

B. eject the null hypothesis

C. ail to reject the null hypothesis

D. ccept the null hypothesis

View answer

Correct Answer: B

Question #87

Deferred credits arise because of:

A. n over-estimation of assets or earnings, which must now be reversed

B. one of these answers

C. he concept of accrual accounting

D. he use of cash accounting

View answer

Correct Answer: C

Question #88

If you deposit $2,500 into an account paying 6% per year, simple interest, how much is in the account in 18 months?

A. 2,651

B. 2,725

C. 2,750

D. 2,349

E. 225

View answer

Correct Answer: B

Question #89

As the size of the sample increases, what happens to the shape of the sampling mean?

A. egatively skewed

B. annot be predicted in advance

C. ositively skewed

D. one of these answers

E. pproaches a normal distribution

View answer

Correct Answer: E

Question #90

Shortin Mart is a quantitative research analyst with Dataminers, an investment advisory firm which prides itself on finding patterns in past market data. Shortin recently used data on high-yield, distressed firm corporate convertible bonds and discovered that over the last 3 years, this class has generated an astounding 76% rate of return (assuming optimal conversion). Realizing that this result is mainly due to a strong bull market, he recommends to his portfolio managers that if they believe the market wi

A. ot violated any code of ethics

B. II and IV only

C. I and III only

D. only

E. I only

View answer

Correct Answer: D

Question #91

A 6% U.S. Treasury security maturing 9/30/10 is quoted at a price of 97.625 on July 1. The bond pays interest semiannually on March 31 and September 30. On July 1, the clean price of this bond would be closest to:

A. 976

B. 991

C. 946

View answer

Correct Answer: A

Question #92

Which of the following is/are true about straight-line depreciation?

A. ith constant pre-depreciation income, it leads to an increasing rate of return over time

B. , II & III

C. & III

D. I & III

E. & II

View answer

Correct Answer: D

Question #93

Frictional unemployment means

A. here is a decline in the demand for labor in the aggregate, due to recessionary tendencies in the economy

B. here are not enough jobs to go around

C. obs are plentiful but workers scarce

D. mperfect information prevents qualified workers from matching up with the available jobs

View answer

Correct Answer: D

Question #94

The slope coefficient in a regression measures:

A. he significance of the regression line

B. he percentage change in the dependent variable caused by a 1% change in the independent variable

C. he rate at which the dependent variable changes with respect to the independent variable

D. he change in the independent variable caused by a unit change in the dependent variable

View answer

Correct Answer: C

Question #95

Two newly hired fixed income analysts are debating the merits of federal agency backed mortgage securities, specifically mortgage passthroughs and collateralized mortgage obligations (CMOs). Analyst A and Analyst B make the following statements:Analyst A:Investors in mortgage pass-through securities backed by one mortgage pool have equal exposure to prepayment risk, whereas investors in the CMOs of one pool have different exposures to prepayment risk. Analyst B:Investors in CMOs have greater protection agai

A. nly Analyst A is correct

B. nly Analyst B is correct

C. either analyst is correct

View answer

Correct Answer: A

Question #96

A firm uses LIFO for inventory costing. The beginning inventory balance of the firm was 700. During the period,it purchased inventory worth 320 and sold goods worth 270. The market value of the inventory at the end of the period was 650. The total inventory expense during this period was ________.

A. 70

B. 70

C. 20

D. 40

View answer

Correct Answer: A

Question #97

The least squared regression minimizes the:

A. djusted R-square

B. bsolute value of the distance between the observed points and the regression line

C. xplained variance

D. he square of the distance between the observed points and the regression line

View answer

Correct Answer: D

Question #98

There are 2,000 eligible voters in a precinct. Despite protests from knowledgeable persons that a sample size of 500 was too large in relation to the total, the 500 selected at random were asked to indicate whether they planned to vote for the Democratic incumbent or the Republican challenger. Of the 500 surveyed, 350 said they were going to vote for the Democratic incumbent. Using the 0.99 confidence coefficient, what is the confidence limits for the proportion who plan to vote for the Democratic incumbent

A.

B.

C. one of these answers

D.

E.

View answer

Correct Answer: C

Question #99

Most components of the balance sheet are reported at

A. istorical cost plus allowance for inflation

B. air market value

C. istorical cost

D. eplacement value

View answer

Correct Answer: C

Question #100

Standard III (F) is ________.

A. esponsibilities of Supervisors

B. isclosure of Conflicts to Employer

C. bligation to Inform Employer of Code and Standards

D. isclosure of Additional Compensation Arrangements

E. one of these answers

F. uty to Employer

View answer

Correct Answer: E

Question #101

Mark Waiters' risk aversion is relatively high compared to other individual investors. Waiters is interested in generating some income on his equity portfolio. Walters decides to establish a covered call position on CGF stock and simultaneously establish a protective put position on HSD stock. After establishing the covered calland protective put positions, which of the following would least likely describe Walters' portfolio, relative to the positions before adding the options?

A. he HSD position will have a higher break even price and less downside risk

B. he CGF position will have a lower break even price and more upside potential

C. he HSD position will have lower upside potential and less downside risk

View answer

Correct Answer: B

Question #102

The peaks and valleys of the business cycle tend to be smoothed out using which inventory method?

A. ross profit method

B. IFO

C. eighted average

D. IFO

View answer

Correct Answer: B

Question #103

There are 10 rolls of film in a box and 3 are defective. Two rolls are to be selected, one after the other. What is the probability of selecting a defective roll followed by another defective roll?

A. /120, or about 0

B. /15, or about 0

C. one of these answers

D. /4, or 0

E. /2, or 0

View answer

Correct Answer: B

Question #104

Which of the following can be found in Standard II?

A. embers shall not participate in plagiarism

B. embers shall maintain appropriate records to support the reasonableness of recommendations

C. embers shall maintain knowledge of and comply with all applicable laws

D. embers shall not undertake any independent practice in competition with employer without written consent

E. embers shall make reasonable efforts to achieve public dissemination of material nonpublic information disclosed in breach of a duty

View answer

Correct Answer: A

Question #105

The financial analyst may ________.

A. ot accept gifts from issuers of securities under any circumstances

B. ccept modest gifts

C. ccept any gift, as long as it is disclosed

D. one of these answers

View answer

Correct Answer: B

Question #106

A stockbroker placed the following order:50 shares of Kaiser Aluminum preferred at $104 a share100 shares of GTE preferred at $25 1/4 a share20 shares of Boston Edison preferred at $9 1/8 a shareWhat is the weighted mean price per share?

A. 79

B. 25

C. 103

D. one of these answers

E. 42

View answer

Correct Answer: D

Question #107

The distribution of a sample of the outside diameters of PVC gas pipes approximates a symmetrical, bell- shaped distribution. The mean outside diameter of the sample is 14.0 inches, and the standard deviation is 0.1 inches. About 68 percent of the outside diameters lie between what two amounts?

A. 3

B. 3

C. 3

D. one of these answers

E. 3

View answer

Correct Answer: A

Question #108

The following data are available for a firm for a given year:Net Sales 21,896Sales & marketing expenses 4,346Administrative expenses 2,143COGS 10,084Depreciation 967Interest expense 573Tax rate 35%Dividends paid 3,445Preferred Dividends 897Average total equity 37,432Average common equity 26,782Average total liabilities 18,583In the above example, the firm's return on total capital equals ________.

A. 1

B.

C.

D.

View answer

Correct Answer: C

Question #109

Uncertainty may cause banks to hold larger excess reserves. Other things constant, this will

A. end to reduce the money supply during a period of inflation and increase it during a recession

B. end to reduce the money supply

C. end to increase the money supply

D. ave no effect on the money supply

View answer

Correct Answer: B

Question #110

What is the Net Present Value of this series of annual cash flows using an interest rate of 20% per year: Year0: <$6,000>, Year 1: $4,000, Year 2: $3,000, Year 3: $2,000, Year 4: $1,000? (Note that the <> are used to indicate a negative number).

A. 1,077

B. 1,056

C. 589

D. 1,134

E. 981

View answer

Correct Answer: B

Question #111

Eternal Life Insurance has a policy that will pay $50,000 per year starting 20 years from now, to you and all your progeny. If the appropriate discount rate is 10% per year and you have to pay premiums every year for the next 15 years starting at the end of this year, what's the annual premium payment that you and your heirs must make for this to be a fair deal?

A. 10,749

B. 14,495

C. 9,771

D. 12,189

View answer

Correct Answer: A

Question #112

When a trustee for private investment funds has responsibility toward current beneficiaries who are income oriented and future beneficiaries ("remaindermen") who are capital growth oriented, she has primary fiduciary duty toward:

A. oth have to be treated on the same footing

B. he income beneficiaries

C. he remaindermen

D. nsufficient information

View answer

Correct Answer: A

Question #113

An improvement in technology would shift which of the following curves?

A. ggregate demand and long-run aggregate supply

B. hort-run and long-run aggregate supply

C. nly short-run aggregate supply

D. ggregate demand and short-run aggregate supply

E. nly aggregate demand

View answer

Correct Answer: B

Question #114

Krissy Steele, CFA, manages money for high net worth individuals. Steele develops unique investment policies for all of her clients and uses various investment funds to construct portfolios. However, Steelehas beenreluctant to use hedge funds. Which of the following statements made by Steele is least likely to be correct?

A. he volatility of historical returns associated with hedge fund indexes understates their true risk level

B. edge fund returns are normally distributed

C. ublished information on hedge fund returns is based on incomplete historical data

View answer

Correct Answer: B

Question #115

Which of the following rules apply for calculations under the Performance Presentation Standards?

A. ccrual accounting must be used for fixed-income securities

B. ll of these answers

C. otal return, including realized and unrealized gains and losses, must be used

D. ime-weighted rate of return must be used

View answer

Correct Answer: B

Question #116

Steffanie Graff is an investment advisor with Wimbledon Advisors, Inc. She recently obtained her CFA charter, reflected on her new business cards. In a meeting, she told a couple of her new clients something to the effectof the following: "I have a long record of successful investment advises, which have led my client accounts to have an annual return of 32% over the past 3 years. I am sure you will be quite satisfied with my performance." In reality, a large part of this return was caused by a very lucky c

A. es, because she has misused her CFA charter to imply superior performance

B. es, because the statements misrepresent her track record

C. es, since her presentation of her own performance is in violation of the AIMR-PPP

D. o, because the statements are factual and she has not promised any future returns

View answer

Correct Answer: B

Question #117

What is your monthly payment, beginning next month, on a $19,000 loan, if you pay it off over 48 months and the interest rate is 5.9% per year, compounded monthly?

A. 398

B. 1,411

C. 448

D. 397

E. 445

View answer

Correct Answer: E

Question #118

The primary purpose of the statement of cash flows is to:

A. easure the change in the company's assets

B. tate the company's financial position at period-end

C. rovide information about a company's cash receipts and cash payments during the accounting period

D. nalyze net income during the accounting period

View answer

Correct Answer: C

Question #119

If alpha equals 0.05 for a two-tailed hypothesis test, how large is the area of rejection in the upper or right tail?

A.

B.

C.

D.

E. one of these answers

View answer

Correct Answer: B

Question #120

Which of the following would appear on the liability side of the balance sheet of a commercial bank?

A. oans outstanding

B. emand and other transaction deposits

C. ault cash

D.

View answer

Correct Answer: B

Question #121

An analyst has stated that, holding all else constant, an increase in the maturity of a coupon bond will increase its interest rate risk, and that a decrease in the coupon rate of a coupon bond will decrease its interest rate risk.The analyst is correct:

A. nly with respect to the effect of the increase in the maturity

B. nly with respect to the effect of the decrease in the coupon rate

C. ith respect to both the effect of the increase in maturity and the effect of the decrease in the coupon rate

View answer

Correct Answer: A

Question #122

Smith, a research analyst with a brokerage firm, decides to change his recommendation on the common stock of Green company, Inc., from a buy to a sell. He mails this change in investment advice to all the firm's clients on Wednesday. The day after the mailing, a client calls with a buy for 500 shares of Green Company. In this circumstance, Smith should:

A. ccept the order

B. dvise the customer of the change in recommendation before accepting the order

C. ot accept the order because it is contrary to the firm's recommendation

D. ot accept the order until five days have elapsed after the communication of the change in recommendation

View answer

Correct Answer: B

Question #123

Which of the following is/are true?

A. he mean of a sample represents its average value

B. II only

C. V only

D. I only

E. only

F. & II

View answer

Correct Answer: A

Question #124

In computing skewness, which of the following is true?

A. t uses the cubed deviation from the mean

B. and III

C. I and III

D. , II, and III

E. one of these answers is correct

View answer

Correct Answer: C

Question #125

Which of the following statements is false?

A. eal GDP excludes earnings by domestic citizens abroad

B. he change in real GDP plus the inflation rate equals growth in nominal GDP

C. hanges in nominal GDP include the impact of changes in the money supply

D. eal GDP measures strictly changes in national output

E. hange in nominal GDP is always greater than the change in real GDP

View answer

Correct Answer: E

Question #126

What is the annual Internal Rate of Return of this series of annual cash flows: Year 0: <$6,000>, Year 1:$4,000, Year 2: $3,000, Year 3: $2,000, Year 4: $1,000 (Note that the <> are used to indicate a negative number).

A. 5

B. 7

C. 4

D. 1

E. 3

View answer

Correct Answer: D

Question #127

A firm has convertible bonds, preferred equity, common equity and straight bonds in its capital structure. In calculating Diluted EPS, which of the following is true about the earnings number used, assuming the convertible bonds are dilutive?

A. arnings used = Net income - preferred dividends + interest payments on convertible

B. arnings used = Net income - preferred dividends - interest payments on convertible net of taxes

C. arnings used = Net income - preferred dividends - interest payments on convertible before taxes

D. arnings used = Net income - preferred dividends + interest payments on convertible net of taxes

View answer

Correct Answer: D

Question #128

You have invested in a long-term, fixed deposit account earning 4% per year for 20 years, compoundedannually. Your friend has invested in a similar account but one that earns 4.25% per year, compounded semi- annually. If each of you deposited $5,000, by what amount is your friend wealthier than you due to this deposit?

A. 538

B. 601

C. 639

D. 521

View answer

Correct Answer: C

Question #129

Profit margin is a ratio that:

A. hows the return on net sales

B. s calculated as net sales divided by operating expenses

C. ields the company's financial position at a point in time

D. ompares total assets to net sales

View answer

Correct Answer: A

Question #130

Stock A is highly volatile while stock B has low volatility. The difference between the arithmetic and geometric rates of return will be:

A. ame for both stocks, since the difference is not dependent on volatility

B. arger for stock A or stock B, depending on their riskiness

C. arger for stock A

D. arger for stock B

View answer

Correct Answer: C

Question #131

A firm has a net income of 150, an increase in accounts receivables of 30, depreciation of 55 and a decrease in accounts payable of 25. Its operating cash flow is ________.

A. 00

B. 50

C. 5

D. 10

View answer

Correct Answer: B

Question #132

The significance level in hypothesis testing refers to the:

A. robability of Type II error

B. -probability of Type I error

C. oint significance of the associated regression, indicated by the F-statistic

D. robability of Type I error

E. one of these answers

View answer

Correct Answer: D

Question #133

An employee has a duty of ________ to his current employer, even if he has already disclosed plans to leave within the near future.

A. oyalty

B. udgment

C. one of these answers

D. agacity

E. rudence

View answer

Correct Answer: A

Question #134

A sample of the amounts spent to heat all-electric homes of similar sizes in March revealed these amounts (to the nearest dollar): $212, $191, $176, $129, $106, $92, $108, $109, $103, $121, $175 and $194. What is the range?

A. 130

B. 100

C. 120

D. one of these answers

E. 112

View answer

Correct Answer: C

Question #135

Standard V (B) addresses any practice that would lead to misrepresentation of a member's record, whether the practice involves performance ________ or performance ________.

A. resentation; measurement

B. one of these answers

C. resentation; benchmarking

D. ssessment; benchmarking

E. easurement; assessment

F. ssessment; presentation

View answer

Correct Answer: A

Question #136

When an economy operates well below its full-employment capacity and the marginal propensity to consume is 3/4, a $20 billion increase in autonomous investment will cause the equilibrium income to rise

A. 80 billion

B. 40 billion

C. 20 billion

D. 15 billion

View answer

Correct Answer: A

Question #137

An auditor will express an adverse opinion if

A. he firm' s ability to continue as a going concern is subject to substantial doubt

B. one of these answers

C. qualified opinion cannot be expressed because the auditor lacks independence

D. violation of GAAP is sufficiently material that a qualified opinion is not justified

E. severe scope limitation has been imposed by the client

View answer

Correct Answer: D

Question #138

Regarding beneficiaries and remaindermen, current life-income beneficiaries prefer to receive ________; remaindermen would rather have ________.

A. minimal current income; a high rate of current income

B. mall incremental principal repayments; predictable current income

C. one of these answers

D. rowth and stability of principal; a high rate of current income

View answer

Correct Answer: C

Question #139

Which inventory costing method is most useful in estimating the amount of inventory lost or destroyed by theft, fire, or other hazards?

A. verage cost method

B. IFO

C. one of these answers is correct

D. IFO

E. ross profit method

View answer

Correct Answer: E

Question #140

"Decision makers systematically err in their forecasts of economic variables." This is implied by which of the following:

A. ational Expectations hypothesis

B. daptive Expectations hypothesis

C. andom Expectations hypothesis

D. onstant Expectations hypothesis

View answer

Correct Answer: B

Question #141

In computing kurtosis, which of the following is true?

A. t raises the deviation from the mean to the fourth power

B. , II, and III

C. one of these answers is correct

D. I and III

E. and III

View answer

Correct Answer: D

Question #142

Which of the following is/ are true?

A. ssets = Equity + LiabilitiesII

B. I & IV

C. only

D. & II

E. II only

View answer

Correct Answer: B

Question #143

Which of the following statements regarding confidence levels and/or tests of significance is/are false? Choose the best answer.

A. n most hypothesis tests, the significance level is set equal to 0

B. ll else equal, the probability of a Type I error decreases as the level of confidence increases

C. he probability of a Type I error is denoted by the Greek letter alpha

D. he confidence level of a hypothesis test can be found by subtracting the level of significance from the number one

E. ore than one of these answers is false

F. he significance level of a test is equal to the power of a test

View answer

Correct Answer: F

Question #144

The following is true about liquidating dividends:

A. ll of these answers

B. hese dividends return part of the original investment to the stockholders

C. he cash dividend account is closed to retained earnings

D. hey only occur when the company is making a major acquisition

View answer

Correct Answer: B

Question #145

You are evaluating 5 portfolio managers (A, B, C, D, and E) whose Sharpe ratios are 0.25, 0.41, 0.92, 0.78, and 0.51, respectively. Which manager would most risk-averse investors prefer?

A.

B.

C.

D. one of these answers is correct

View answer

Correct Answer: A

Question #146

Production of passenger cars in Japan increased from 3.94 million in 1986 to 6.74 million in 1994. What is the geometric mean annual percent increase?

A. 6

B.

C.

D. 7

E.

View answer

Correct Answer: E

Question #147

If alpha = .05 for a two-tailed test, how large is the acceptance area?

A.

B. one of these answers

C.

D.

E.

View answer

Correct Answer: C

Question #148

Under the AIMR Code of Ethics, members shall practice and encourage others to practice in a professional and ethical manner that will reflect credit on members and their ________.

A. amilies

B. mployer

C. ublic contacts

D. rofession

E. one of these answers

View answer

Correct Answer: D

Question #149

Given the following data, what will an arbitrageur earn after one year on a covered interest arbitrage if he begins with $1 million?In New York today Interest rate = 7%In London today spot rate = $1.75/LInterest rate = 12%In London one year forward rate = $1.68/L

A. 7,560

B. 5,200

C. 4,300

D. 3,580

E. 6,800

View answer

Correct Answer: B

Question #150

Suppose you were given $10,000 today and deposited it into an account paying 10% per year, compounded monthly. If you know that you will need $5,000 in the account 5 years from now, what monthly withdrawal can you make from the account, beginning one month from now, that will leave the account with exactly $5,000 in it in 5 years?

A. 147

B. 83

C. 1,066

D. 140

E. 1,001

View answer

Correct Answer: A

Question #151

If the amount of money in circulation is $200 million and the nominal GDP is $950 million, then the money velocity is ________.

A.

B.

C.

D. 9

View answer

Correct Answer: B

Question #152

The implications of stock market efficiency for fundamental analysis indicates that using the top-down approach to analyze a firm will yield:

A. uperior returns using past and current information

B. uperior returns compared to a randomly selected buy-and-hold portfolio of stocks

C. eturns that are not superior if the analysis only looks at past and current information

D. uperior returns using only past information

View answer

Correct Answer: C

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