CFA Level 1 Exam Questions and Answers PDF, Free Download

Question #1

What is the Net Present Value of this series of annual cash flows using an interest rate of 15% per year: Year0: <$10,000>, Year 1: $5,000, Year 2: $5,000, Year 3: $7,500? (Note that the <> are used to indicate a negative number).

A. 2,981

B. 5,077

C. 3,059

D. 3,224

E. 3,104

View answer

Correct Answer: C

Question #2

An advantage of the duration/convexity approach over the full valuation approach is:

A. ts superior accuracy for nonparallel shifts in the yield curve

B. t is not based on yield to maturity, which is a summary measure

C. t saves considerable time when working with portfolios of bonds

View answer

Correct Answer: C

Question #3

Kim Lee is valuing a closely held private shoe retailing company. She compares the company to other shoe retailing competitors that are publicly traded and are highly liquid. Relative to the private company, the shares of the publicly traded competitors most likely include a:

A. arketability discount

B. inority interest discount

C. ontrol premium

View answer

Correct Answer: B

Question #4

Structural unemployment is a result of

A. ot enough employees to fill available jobs

B. naccurate and/or costly information about job opportunities

C. nsufficient employment in the building trades

D. n inadequate matching of qualified workers and available jobs

View answer

Correct Answer: D

Question #5

You are examining a portfolio composed of 10% money-market investments, 30% bonds, and 60% stocks. Last year, the return on the money-market investments was 4%; the return on bonds was 9%, and the return on stocks was -11%. What is the portfolio weighted average return?

A. 3

B. 4

C. one of these answers is correct

D. 3

View answer

Correct Answer: C

Question #6

Consider the following three investments:Future valueyearsinterest rate1.$50,000 89% per year2.$20,000 612% per year3.$35,000 37% per yearThe present values of the 3 investments are:

A. 28,193, $12,145, $31,422

B. 99,628, $39,476, $42,877

C. 25,093, $10,133, $28,570

D. 24,192, $11,876, $27,864

View answer

Correct Answer: C

Question #7

Which of the following is NOT a financing cash flow?

A. oth "cash used for share repurchase" and "cash received from issuing bonds

B. ash used for share repurchase

C. ash received from issuing bonds

D. ash acquired from the sale of a liquid asset

View answer

Correct Answer: D

Question #8

If the sample variance for a frequency distribution consisting of hourly wages was computed to be 10, what is the sample standard deviation?

A. 3

B. one of these answers

C. 1

D. 4

E. 10

View answer

Correct Answer: A

Question #9

Which of the following is/are true about insider trading laws?

A. orporations cannot discriminate amongst recipients without risking insider trading liability

B. only

C. & II

D. , II & III

E. I & III

View answer

Correct Answer: B

Question #10

Each month, the Bureau of Labor Statistics calculates unemployment by

A. aking projections based on census data

B. urveying large business and government employers

C. urveying all workers in the economy

D. urveying a random sample of households

View answer

Correct Answer: D

Question #11

Curzon Corp reported the following in its Shareholder's Equity account:In calculating a Price to Book value for Curzon, the appropriate book value per common share is closest to:

A. 10

B. 12

C. 13

View answer

Correct Answer: B

Question #12

If you buy a house costing $120,000 and pay for it over 30 years, what is your monthly payment, if your loan's interest rate is 7% per year, compounded monthly and the first payment is due next month?

A. 4,371

B. 8,400

C. 798

D. 665

E. 804

View answer

Correct Answer: C

Question #13

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%If an observation on X indicates X = 5 the estimated value of Y would be ________.

A. 4

B. one of these answers

C. 6

D. 0

View answer

Correct Answer: A

Question #14

A firm has a cash conversion cycle of 31.6 days. It turns over its inventory on average in 43.1 days and pays off its payables in an average of 23.2 days. Its receivables turnover ratio equals ________.

A. 1

B. 2

C. 4

D. 5

View answer

Correct Answer: A

Question #15

Which of the following could decrease outstanding capital stock?

A. he exercise of warrants

B. ll of these answers

C. he retention of earnings

D. he payment of a cash dividend

E. he purchase of treasury stock

View answer

Correct Answer: E

Question #16

Arbliss, an AIMR member, has been working for a financial software company, Supersoft Corp. for the past 3 years. He now wants to leave the firm and start his own software proprietorship. Which of the following will not constitute a violation of the AIMR code?

A. aking arrangements to set up the proprietorship prior to leaving current employment, without Supersoft knowing about it

B. only

C. II only

D. I and III only

E. and III only

View answer

Correct Answer: A

Question #17

The ultimate responsibility to ensure compliance with code rests with:

A. very member of the firm

B. he CEO of the firm

C. ll of these answers

D. he highest ranking AIMR member of the firm

View answer

Correct Answer: D

Question #18

Suppose you need $500 in 20 months. How much must you deposit today, if the deposit will earn interest at 8% per year, compounded monthly?

A. 2,330

B. 437

C. 571

D. 249

E. 107

View answer

Correct Answer: B

Question #19

At December 31, 1996, Davis Inc. awaits judgment on a lawsuit for a competitor's infringement of Davis' patent. Legal counsel believes it is probable that Davis will win the suit and indicated the most likely award together with a range of possible awards. How should the lawsuit be reported in Davis' 1996 financial statements?

A. one of these answers

B. either in note disclosure nor by accrual

C. n note disclosure only

D. y accrual for the lowest amount of the range of possible awards

E. y accrual for the most likely award

View answer

Correct Answer: C

Question #20

The wildlife department has been feeding a special food to rainbow trout fingerlings in a pond. A sample of the weights of 40 trout revealed that the mean weight is 402.7 grams and the standard deviation 8.8 grams. What is the point estimate?

A. one of these answers

B. 0

C.

D. 0

E. 02

View answer

Correct Answer: E

Question #21

Wendy Jones, CFA, is reviewing a current bond holding. The bond's duration is 10 and its convexity is 200. Jones believes that interest rates will fall by 100 basis points. Calculate the bond's percentage price change based on a 100 basis point decline.

A. 8

B. 8

C. 12

View answer

Correct Answer: C

Question #22

An investment management firm has been hired by ETV Corporation to work on an initial public offering for the company. The firm's brokerage unit now has a sell recommendation on ETV, but the head of the investment banking department has asked the head of the brokerage unit to change the recommendation from sell to buy. According to the Standards, the head of the brokerage unit would be permitted to:

A. ncrease the recommendation by no more than one increment (in this case, to a hold recommendation)

B. ssign a new analyst to decide if the stock deserves a higher rating

C. lace the company on a restricted list and give only factual information about the firm

D. eassign responsibility for rating the stock to the head of the investment banking unit

View answer

Correct Answer: C

Question #23

A firm's financial data show:Taxable income 1,500Taxes paid 500Non-cash operating expenses 780Bonds retired 700Loss on retired bonds 140Then, the financing cash flow equals ________.

A. 700

B. 840

C. 60

D. 900

View answer

Correct Answer: D

Question #24

Sharleef Nettleton, a quantitative analyst with Churn Brothers Brokerage, is examining a data sample and has amassed the following information:Standard deviation of the sample: 2.90Number of observations: 68Degrees of freedom: 2Sample mean: 114Assume that Ms. Nettleton formulates a null hypothesis that states that the value of the population mean is zero. Additionally, assume that the population standard deviation is unknown. Given this information, what is the standard error of the estimate? Further, what

A.

B.

C.

D.

E. one of these answers is correct

F.

View answer

Correct Answer: D

Question #25

Monserrat Troy is a portfolio analyst at Merryl Flynch Inc., a leading investment bank. Merryl's corporate policy prohibits its employees from trading in IPOs even if they are not being underwritten by Merryl. Recently, a fast- growing internet firm, Netblaze, announced that it was going public. Monserrat's friend, Victor, told her that he could get her bid in for a few shares of the IPO. The size of the deal was very small, amounting to less than a couple of thousand dollars. Monserrat went ahead and bough

A. iolated Standard II (B) - Professional Misconduct - by violating company policy

B. id not violate the AIMR code of conduct even though she violated the company policy since the size of her transaction was extremely small

C. iolated Standard III (B) - Duty to Employer - by violating company policy

D. iolated Standard III (C) - Disclosure of Conflicts to Employer - by violating company policy

View answer

Correct Answer: D

Question #26

What annual interest rate, compounded annually, would cause a series of 30 deposits of $500 to accumulate to $50,000, if the first deposit is made one year from today?

A.

B. 0

C.

D.

E. 0

View answer

Correct Answer: C

Question #27

A sample of 10 observations is drawn from a population with mean 17. The mean of the observations equals 14.3 and the sample standard deviation equals 4.8. The sampling error in mean equals ________.

A.

B. 2

C. 4

D.

View answer

Correct Answer: B

Question #28

Which of the following would not be included as equity in a corporate balance sheet?

A. ommon stock

B. referred stock

C. ash

D. etained earnings

View answer

Correct Answer: C

Question #29

Consider the following list of numbers:6, 4, 3, 8, 3, 3, 5, 9, 11, 4For this list, the mean, the median and the mode are given respectively by:

A.

B.

C. , 3, 5

D.

View answer

Correct Answer: A

Question #30

Which of the following is/are true?

A. here are as many values above the mode as below it

B. only

C. I, III & IV

D. I only

E. , III & IV

F. II only

View answer

Correct Answer: E

Question #31

Standard III (A) - Obligation to Inform Employer of Code & Standards - requires all AIMR members, Charterholders and CFA candidates inform their employers about their personal obligation to abide by the code. Which of the following is/are true in regard to this requirement?

A. he notification can be in either oral form or in writing, either in print, handwriting or by electronic means like email

B. II only

C. , II and III

D. and III only

E. and II only

View answer

Correct Answer: A

Question #32

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

A. he three conventional level of confidence are 0

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

C. he confidence level is typically equal to (1 - the probability of a Type II error)

D. he significance level is denoted by the Greek letter alpha

E. he confidence level is equal to the significance level

F. ore than one of these answers is incorrect

View answer

Correct Answer: F

Question #33

A mortgage holding company has found that 1% of its mortgage holders default on their mortgage and lose the property. Furthermore, 90% of those who default are late on at least two monthly payments over the life of their mortgage as compared to 45% of those who do not default. What is the probability that a mortgagee with two or more late monthly payments will default on the mortgage and lose the property?

A. one of these answers

B.

C.

D.

E.

View answer

Correct Answer: D

Question #34

Bill Turner, CFA, is short a futures contract on wheat. Turner entered into the futures position three months ago at a contract price of $50. The contract expiration is tomorrow. The settlement prices for the past four days (from oldest to most recent) were $56, $53, $49, and $52. If the settlement price on the expiration day is $57, which of the following best describes a method Turner is most likely to use to terminate his futures contract?

A. ell a futures contract for $57 and receive a mark-to-market profit of $5

B. uy a futures contract for $57 and incur a mark-to-market loss of $5

C. eave the contract open, deliver the wheat to the long, and receive a price of $57

View answer

Correct Answer: B

Question #35

When the weighted average method is used, ending inventory units are priced at the:

A. verage price

B. one of these answers

C. ower of cost or market

D. arliest price

View answer

Correct Answer: A

Question #36

Which of the following statements is NOT correct?

A. embers who work in a country where the Code and Standards impose a lesser degree of responsibility than local laws and regulations must still adhere to the Code and Standards

B. ll of these statements are correct

C. tandards II through V address specific conduct

D. tandard I sets forth minimum standards relating to general activities

View answer

Correct Answer: A

Question #37

Which is true of positively skewed distributions?

A. hey have a limited, but frequent, upside

B. II

C. and II

D. I

E. and III

F. I and III

View answer

Correct Answer: A

Question #38

A random variable can take on four values: 12, 36, 78, 111, each with probability 0.25. The standard deviation of the random variable equals ________.

A. 52

B. 9

C. ,451

D. 8

View answer

Correct Answer: D

Question #39

The probability of getting a value less than 1.3 from a standard normal distribution equals ________.

A.

B.

C.

D.

View answer

Correct Answer: C

Question #40

You are examining the return on equity ratios of the nation's commercial airlines. You have calculated the mean ROE to be 8%, and the sum of the squared ROEs is 0.27. Assuming there are 30 commercial airlines, what is the population variance of ROEs in this industry?

A. %%

B. 2%%

C. 0%%

D. 6%%

View answer

Correct Answer: D

Question #41

Which of the following correctly defines an element directly related to measuring the performance and status of a business entity?

A. ains are increases in equity from transactions and other events and circumstances that result from revenues or investments by owners

B. quity is a residual interest

C. nvestments by owners are limited to receipts of assets and satisfaction or conversion of liabilities

D. evenues are inflows from peripheral or incidental transactions as well as the entity's ongoing major operations

E. one of these answers

View answer

Correct Answer: B

Question #42

A bank has deposits of $23 billion and reserves of $3.1 billion. If the excess reserves equal $400 million, the deposit expansion multiplier equals ________.

A.

B.

C.

D.

View answer

Correct Answer: C

Question #43

Which of the following is not an example of a cash flow from operations?

A. one of these answers is correct

B. ash received from customers

C. ash paid for merchandise

D. ash paid for taxes

View answer

Correct Answer: A

Question #44

Firms A and B have simple capital structure with the same number of common stock outstanding. A finances its operations relying on debt financing while B prefers issuing preferred equity. If both the firms had the same net income last year, Firm A will have a:

A. igher EPS than B

B. ower EPS than

C. ll of these answers can happen

D. he same EPS as B

View answer

Correct Answer: A

Question #45

Mark Davidson and James Case are bond traders at a large fixed-income investment firm. Both Davidson and Case have developed bond valuation models for bonds with embedded options. Using their respective valuation models, the traders have calculated the price of BMC Corp.'s callable and putable bonds. Davidson uses a yield volatility assumption of 23%, while Case uses an assumption of 31%. Other than the volatility assumption, the traders use identical inputs for the valuation models. Which of the following

A. avidson's model will calculate a lower value for the call option and a lower value for the putable bond

B. ase's model will calculate a higher value for the call option and a lower value for the putable bond

C. avidson's model will calculate a lower value for the put option and a lower value for the callable bond

View answer

Correct Answer: A

Question #46

Which of the following can be found in Standard V?

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

B. embers shall not participate in plagiarism

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

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

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

View answer

Correct Answer: C

Question #47

Steve Brown is questioned by his superior about the commonly cited criticisms and benefits of the derivatives market. Which of Brown's statements regarding the criticisms and benefits of derivative markets is most likely correct?

A. erivatives markets are often criticized for being too risky and illiquid for all but the most knowledgeable investors

B. erivatives benefit financial markets due to the price discovery and risk management functions they provide

C. erivatives benefit financial markets by generating high fees for dealers wilting to make a market in these securities

View answer

Correct Answer: B

Question #48

An asset is estimated to have a total life of 8 years. Its acquisition cost is 16,000 and a salvage value of 4,000. The firm follows the double declining method of depreciation. In the second year, the rate of depreciation for the firm's asset is closest to ________.

A. 5%

B. 7%

C.

D. 2

View answer

Correct Answer: A

Question #49

A cumulative frequency distribution on days absent during a calendar year by employees of a manufacturing company is shown below.Days AbsentCumulative ## of Employees0 - 2603 - 5316 - 8149 - 11612 - 142How many employees were absent between 6 and 11 days?

A. 2

B. 7

C. 0

D. one of these answers

E.

View answer

Correct Answer: A

Question #50

A 10-year, semiannual-pay $1,000 bond with a 6% coupon is currently priced at $864.10, to yield 8%. If yields increase by 50 basis points (bp), the new price of the bond would be $833.82. If yields decrease by 50 bp, the new price of the bond would be $895.78. The expected percentage change in the price of this bond for a 100 bp change in yield is closest to:

A.

B.

C. 4

View answer

Correct Answer: B

Question #51

What annual interest rate, compounded annually, would cause a series of 20 deposits of $500 to accumulate to $18,000, if the first deposit is made one year from today?

A.

B.

C.

D.

E.

View answer

Correct Answer: E

Question #52

A random variable, X, has a mean of 12 and a standard deviation of 14. If another variable, Y, is defined by Y = 2X - 3, the coefficient of variation of Y is ________.

A.

B.

C.

D.

View answer

Correct Answer: B

Question #53

Under US GAAP accounting, R&D expenses cannot be capitalized. They must be expensed as and when incurred. Which of the following is NOT a reason to support this practice?

A. ost R&D activities represent intangible benefits which are hard to evaluate objectively from an accounting perspective

B. n most cases, there is a significant lag between R&D expenses and the determination of the potential success of the research

C. here remains a high uncertainty about the ultimate benefits to be derived from the R&D activities on which the expenses are incurred

D. &D expenses are difficult to measure and hence, must be expensed in accordance with accrual accounting principles

View answer

Correct Answer: D

Question #54

What is the present value today of these annual cash flows: <$10,000>, $5,000, $4,000, $3,000, $2,000? Assume the first cash flow occurs today and an interest rate of 8% per year, compounded annually. (Note that the <> are used to indicate a negative number).

A. 1,910

B. 2,045

C. 2,110

D. 2,380

E. 4,000

View answer

Correct Answer: A

Question #55

What would the bid-ask spread be for pound sterling quoted at $14419-28?

A.

B.

C.

D.

E.

View answer

Correct Answer: D

Question #56

Harold Stone, CFA, is an analyst for Spartacus Venture Capital. Stone is considering investing $3 million in a project with a potential $150 million return over a ten year life. The current risk-free rate is 5%, the equity risk premium is 5%, and the project's beta is 2.0. Stone believes that the project has a 22% probability of failure in the first four years and 13% thereafter. The expected net present value of the project is closest to:

A. I million

B. 2 million

C. 3 million

View answer

Correct Answer: C

Question #57

Given the information below, during which quarters does real income decline? Nominal GDP GDP DeflatorQ 0 (base) 981100Q 1 993101Q 2 1,001106Q 3 1,042111Q 4 1,040107

A. ll four quarters

B. one of these answers is correct

C. ,3

D. only

E. ,3,and 4

F. ot enough information given

View answer

Correct Answer: C

Question #58

Information is ________ if its disclosure would be likely to have an impact on the price of a security or if reasonable investors would want to know the information before making an investment decision.

A. nside information

B. one of these answers

C. reached

D. ecured

E. aterial

F. ipable

View answer

Correct Answer: E

Question #59

What is the name of the act enacted in 1940 that reflects a Congressional recognition of the "delicate" fiduciary nature of an investment advisory relationship and the intent to eliminate, or at least to expose all conflicts of interest?

A. he Investment Company Act

B. he Congressional Investor's Protection Act

C. he U

D. he U

View answer

Correct Answer: C

Question #60

David's gasoline station offers 4 cents off per gallon if the customer pays in cash and does not use a credit card. Past evidence indicates that 40% of all customers pay in cash. During a one hour period twenty-five customers buy gasoline at this station. What is the probability that no more than twenty pay in cash?

A.

B.

C. one of these answers

D.

E.

View answer

Correct Answer: E

Question #61

If you owe $4,500 today and will repay it with 8 annual payments of $900, beginning next year, what is the interest rate per year, compounded annually, that you are paying?

A. 0

B. 9

C. 1

D.

E. 4

View answer

Correct Answer: C

Question #62

What semiannual deposit is needed to accumulate $5,000 in 5 years if the account pays 6% per year, compounded semiannually, assuming that the first deposit is made in 6 months and also assuming that the account already has $750 in it today?

A. 277

B. 436

C. 359

D. 348

E. 778

View answer

Correct Answer: D

Question #63

The procedures for compliance with Standard IV (B.8), Disclosure of Referral Fees, recommend that you disclose all referral agreements ________.

A. t least orally

B. ny of these answers

C. rally or in writing

D. n writing

View answer

Correct Answer: D

Question #64

Under what conditions is Standard II (B)- Professional Misconduct violated?

A. he member is convicted of a misdemeanor

B. I, III & IV

C. , II & IV

D. , II, III & IV

E. V only

View answer

Correct Answer: A

Question #65

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 #66

A bottling company offers three kinds of delivery services-instant, same day and within five days. The profit per delivery varies according to the kind of delivery. The profit for an instant delivery is less than the other kinds because the driver has to go directly to a grocery store with a small load and return to the bottling plan. To find out what effect each type of delivery has on the profit picture, the company has made the following tabulation based on deliveries for the previous quarter.Type of Num

A. 97

B. 72

C. 142

D. one of these answers

E. 100

View answer

Correct Answer: A

Question #67

If the significance level of a test is the probability of incorrectly rejecting the null hypothesis, then the "power of a test" is defined as which of the following? Choose the best answer.

A. he probability of a Type II error

B. ore than one of these answers is correct

C. he "power of a test" is a nonsensical term

D. he probability of incorrectly accepting the alternate hypothesis

E. he probability of correctly rejecting the null

F. he probability of a Type I error

View answer

Correct Answer: E

Question #68

Brown works for an investment counseling firm. Green, a new client of the firm, is meeting with Brown for the first time. Green used another counseling firm for financial advice for years, but she has switched her account to Brown's firm. After a few minutes of get-acquainted talk, Brown explained to Green that she has discovered a highly undervalued stock that offers large potential gains. She recommends that Green purchase the stock. Brown has committed a violation of the Standards. What should she have d

A. rown should have determined Green's needs, objectives and tolerance for risk before making a recommendation for any type of security

B. rown should have explained her qualifications, including her education, training, experience and the meaning of the CFA designation

C. rown should have asked Green her reasons for changing counseling firms

D. rown should have thoroughly explained the characteristics of the company to Green, including the characteristics of the industry in which the company operates

View answer

Correct Answer: A

Question #69

The Income Summary account is

A. permanent account

B. n asset

C. temporary account

D. liability

View answer

Correct Answer: C

Question #70

Inflation contributes to the depreciation of a nation's currency only when a country's rate of inflation is ________ that of its trading partners.

A. ess rapid than

B. qual to

C. ore rapid than

D. one of these answers, inflation rate is irrelevant

View answer

Correct Answer: C

Question #71

Jones company earned $100,000 of pre-tax income in 1998, had $50,000 of pre-tax income in 1997, pays a 40% tax rate and has a dividend payout of 50%. What is the dividend amount declared by Jones Company in 1998?

A. 45,000

B. 40,000

C. 30,000

D. 50,000

View answer

Correct Answer: C

Question #72

In a period of rising prices, the inventory method that gives the highest possible value for ending inventory is:

A. eighted average

B. IFO

C. IFO

D. ross profit

View answer

Correct Answer: B

Question #73

To the extent that people eventually adjust to demand stimulus policies, persistent expansionary macropolicy will lead to

A. ower money interest rates

B. reduction in the long-run unemployment

C. nflation with no permanent reduction in unemployment

D. ore rapid economic growth but no change in prices

View answer

Correct Answer: C

Question #74

If a company converted a short-term note payable into a long-term note payable, this transaction would

A. one of these answers

B. ncrease working capital

C. ecrease working capital and the current ratio

D. ncrease both working capital and the current ratio

E. ecrease only working capital

View answer

Correct Answer: D

Question #75

If you were asked to study the economy over the past five years, you would use the real GDP series rather than the nominal GDP series because

A. he nominal GDP series reflects changes in both output and prices, whereas the real GDP series, roughly speaking, merely reflects changes in output

B. he nominal GDP series fails to account for transfer payments, whereas the real GDP series includes these payments

C. he real GDP series accounts for imports, making it more precise than the nominal GDP series

D. xports are excluded from the real GDP series, making it less complicated than the nominal GDP series

View answer

Correct Answer: C

Question #76

A manufacturer of headache medicine claims it is 70 percent effective within a few minutes. That is, out of every 100 users 70 get relief within a few minutes. A group of 12 patients are given the medicine. If the claim is true, what is the probability that 8 have relief within a few minutes?

A. one of these answers

B.

C.

D.

E.

View answer

Correct Answer: E

Question #77

When the FIFO method is used, ending inventory units are priced at the

A. ost recent price

B. he average price

C. arliest price

D. one of these answers is correct

View answer

Correct Answer: A

Question #78

Assume you buy a computer for $1,450 and agree to pay for it with 36 monthly payments of $55, beginning next month. What is the size of the final payment needed at month 36 to completely pay off the computer, if the interest rate you are being charged is 16% per year, compounded monthly?

A. 0

B. 184

C. 217

D. 187

E. 174

View answer

Correct Answer: B

Question #79

Jorgenson is a senior bond analyst with Morgan Co., a large investment banking firm. Over the past quarter, Morgan's corporate bond department has been betting on the credit spreads in the market narrowing and in anticipation, has invested a large amount of capital in the bonds of two firms, High Tech and Amerizone.com. Unfortunately, the credit spreads have not displayed much activity and as the quarter end is approaching, the department wants to unload the bonds. For this, it puts pressure on Jorgenson to

A. ot violated the AIMR code of ethics

B. iolated Standard IV (A

C. iolated Standard IV (B

D. iolated Standard IV (A

View answer

Correct Answer: A

Question #80

Which of the following is the formula for the covariance between X and Y?

A. X - E(X))*(Y - E(Y))

B. [(X - E(X))*(Y - E(Y))]

C. [(X + E(X))*(Y + E(Y))]

D. [XY - E(XY)]

View answer

Correct Answer: B

Question #81

For ________ of five or fewer portfolios, the disclosure "five or fewer portfolios" may be made rather than a disclosure of the exact number of portfolios.

A. eturns

B. nvestments

C. egments

D. omposites

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Correct Answer: D

Question #82

What simple annual interest rate would cause a $110 deposit to grow to $120 in 2 years?

A.

B.

C.

D. 4

E.

View answer

Correct Answer: A

Question #83

Relationships with and Responsibilities to the Investing Public are dealt with under:

A. tandard V

B. one of these answers

C. tandard III

D. tandard II

E. tandard IV

F. tandard I

View answer

Correct Answer: A

Question #84

An expansionary fiscal policy causes which of the following effects?

A. he domestic currency depreciates

B. I, III & IV

C. , II & III

D. , II, III & IV

E. & III

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Correct Answer: B

Question #85

The amount by which a plant asset depreciated is classified as ________.

A. evenue

B. n expense

C. liability

D. n asset

View answer

Correct Answer: B

Question #86

For a standard normal distribution what is the probability that z is greater than 1.75?

A.

B.

C. one of these answers

D.

E.

View answer

Correct Answer: B

Question #87

Rob Pirate is considering investing in a subordinated tranche in a collateralized mortgage obligation (CMO). If Pirate wishes to measure his interest rate risk for this debt security, which measure would be most appropriate!

A. odified duration

B. ffective duration

C. ffective convexity

View answer

Correct Answer: B

Question #88

If the 1% level of significance is used and the computed value of z is +6.00, what is our decision?

A. o not reject Ho

B. one of these answers

C. eject Ho

D. his cannot be answered

View answer

Correct Answer: C

Question #89

Which of the following is/are true about potentially dilutive securities?

A. ptions and warrants are assumed to be exercised at the beginning of the period or at the time of issuance, whichever is later

B. & II

C. only

D. , II & III

E. I & III

View answer

Correct Answer: B

Question #90

In a binomial probability distribution,

A. here are 2 distinct modes

B. he probability graph is bell-shaped and symmetrical

C. ach trial can only take values between 0 and 1

D. ach trial can take only two values

View answer

Correct Answer: D

Question #91

Which of the following is/are FALSE about Basic EPS and Diluted EPS?

A. asic EPS excludes anti-dilutive securities but Diluted EPS must include these

B. II only

C. & III

D. , II & III

E. I only

View answer

Correct Answer: B

Question #92

In valuing the stock of Evergreen Enterprises, an analyst compiles the following information about the firm:The value of the firm's stock today is closest to:

A. 31

B. 38

C. 53

View answer

Correct Answer: A

Question #93

A hypothesis test is conducted at the .05 level of significance to test whether or not the population correlation is zero. If the sample consists of 25 observations and the correlation coefficient is 0.60, then what is the computed value of the test statistic?

A.

B.

C.

D.

E. one of these answers

View answer

Correct Answer: B

Question #94

If you owe $2,000 today and pay for it by making 20 monthly payments with the first payment made immediately (today), what is the size of this monthly payment, if interest accrues at 7% per year, compounded monthly?

A. 193

B. 191

C. 209

D. 105

E. 106

View answer

Correct Answer: D

Question #95

If you make 22 deposits of $33 with the first deposit occurring next month, how much do you have immediately after the last deposit, if the account earns 4.44% per year, compounded annually?

A. 666

B. 1,207

C. $457

D. 1,313

E. 1,189

View answer

Correct Answer: E

Question #96

Which of the following lend support to supply-side economics?

A. igh marginal tax rates discourage additional work effort and reduce productivity

B. , III & IV

C. & III

D. & IV

E. , II, III & IV

View answer

Correct Answer: C

Question #97

Which of the following relationships is true?

A. ross profit margin < Net profit margin < Operating profit margin

B. ross profit margin < Operating profit margin < Net profit margin

C. ross profit margin > Operating profit margin > Net profit margin

D. et profit margin > Gross profit margin > Operating profit margin

View answer

Correct Answer: C

Question #98

Which of the following statements is true?

A. ecognition is concerned with recognizing a liability from a current cash receipt

B. he Accrual process would reduce an asset that is recorded as a result of a cash payment

C. ealization is the process of converting non-cash resources and rights into money

D. ll of these are true

E. llocation is the process of formally recording or incorporating an item in the financial statements of an entity

View answer

Correct Answer: C

Question #99

Which of the following best describes an balance sheet?

A. one of these answers

B. t reports cash receipts and cash disbursements for a specific accounting period

C. t reports investment activities for a specified accounting period

D. t reports the amount and composition of assets and liabilities for a specific accounting period

E. t reports revenues and expenses for a specific accounting period

View answer

Correct Answer: D

Question #100

Arbaaz, an AIMR member, works for an investment advisory firm, Leon Investments. His friend, Shahzad, recently asked him for some investment recommendations. Arbaaz analyzed Shahzad's portfolio over a weekend and suggested some changes. While he did not accept any remuneration, Shahzad promised him some gifts if his portfolio "performed well." Arbaaz did not inform his employer since he thought he was helpinga friend and in any case, the Shahzad's account was extremely small and there were no financial paym

A. iolated Standard III (B), Duty to Employer

B. as not violated Standard III (B), Duty to Employer, because there was no financial remuneration

C. as not violated Standard III (B), Duty to Employer, because Shahzad's account was too small to be deemed lost business for Leon Investments

D. as not violated Standard III (B), Duty to Employer, because Arbaaz is free to do what he wants on his time as long as it doesn't affect Leon Investments

View answer

Correct Answer: A

Question #101

At the end of the fiscal period, the account debited to show the estimated amount of uncollectible accounts is:

A. ad Debt Expense

B. ccounts Receivable

C. one of these answers

D. nearned Revenue

E. llowance for Uncollectible Accounts

View answer

Correct Answer: A

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