Prepare Confidently for the CFA Level I Exam with Practice Questions

Question #1

Which of the following is/are true about aggregate demand?

A. n increase in the real rates of interest increases current demand

B. I & III

C. & II

D. & III

E. I only

View answer

Correct Answer: A

Question #2

Black Oil is an oil and gas exploration and production company. Black's management hedges its crude oil production using futures contracts. Which of the following would be the least likely method Black would use to close out the futures position?

A. olding the cash settled future until expiration

B. hysically settling according to exchange rules

C. ffsetting the transaction by shorting the oil futures contract on the same exchange

View answer

Correct Answer: C

Question #3

The Keynesian range (the horizontal range) of a short-run aggregate supply curve illustrates that changes in aggregate demand exert little impact on prices and a great deal of impact on output when

A. esources in the economy are fully employed

B. ggregate demand exceeds aggregate supply

C. atural unemployment is present

D. ubstantial excess capacity is present

View answer

Correct Answer: D

Question #4

Everly Smith has passed Level II of the CFA examination. While studying for Level III, he circulates his resume stating that he has "completed Charter Financial Analyst II" and his resume lists his name as "Everly Smith, CFA II." Which of these following statements is correct?

A. verly Smith is not in compliance with the standards regarding use of the CFA designation

B. verly Smith is not in compliance with the standards regarding use of the CFA designation

C. verly Smith is not in compliance with the standards regarding use of the CFA designation

View answer

Correct Answer: B

Question #5

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 #6

Antun Blasevic manages a fixed-income mutual fund which holds a variety of high-yield corporate bonds. His largest position is in Garjun Technologies, which currently trades to yield 8.75%, while the equivalent maturity

A.

B. he yield ratio is 1

C. he absolute yield spread is 67%

D. he relative yield spread is 350 basis points

View answer

Correct Answer: A

Question #7

The relationship of the total debt to the total equity of a firm is a measure of ________.

A. iquidity

B. reditor risk

C. one of these answers

D. rofitability

E. olvency

View answer

Correct Answer: B

Question #8

If senior managers are unwilling to permit dissemination of adverse opinions about a particular corporate client,according to Standard IV (

A. ), you should attempt to put that corporate client on a ________

A. olding-pattern

B. estricted list

C. oratorium register

D. one of these answers

E. uspension roster

View answer

Correct Answer: B

Question #9

How many monthly payments of $30, beginning next month, are needed to pay off a debt of $1,000, if interest accrues at 10% per year, compounded monthly?

A. o solution/Error

B. 2

C. 1

D. 9

E. 7

View answer

Correct Answer: D

Question #10

Which of the following is NOT a reason for sampling the population?

A. ome tests are destructive in nature and hence, should be carried out only on small samples

B. nferences from a sample are the same that would be obtained by studying the entire population

C. t is almost impossible to work with the entire population in most cases

D. amples are far easier to work with than the entire population

View answer

Correct Answer: B

Question #11

The Income Summary account

A. s used to facilitate the closing process

B. ll of these answers are correct

C. s a temporary account

D. hould have a zero balance at period-end

View answer

Correct Answer: B

Question #12

An end-of-period adjustment for depreciation of fixed assets is necessary

A. roper statement of net income

B. o be consistent with the matching principle

C. ll of these answers are correct

D. o recognize the expense of using fixed assets

View answer

Correct Answer: C

Question #13

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 #14

The construction of cash flow statement using the indirect method requires which of the following?

A. ncome Statement

B. & II

C. , II & III

D. , II & IV

E. & III

View answer

Correct Answer: A

Question #15

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 #16

If you deposit $250 a year, beginning next year, for 30 years into an account paying 6% per year, compounded annually, how much is in your account after that last deposit?

A. 21,149

B. 12,334

C. 19,764

D. 18,304

E. 3,441

View answer

Correct Answer: C

Question #17

Sara Jones, CFA, recently purchased a U.S. government security that was issued on 6/1/2007 and will mature on 6/1/2014. Jones purchased the security in the secondary market. This security is most likely an:

A. n-the-run Treasury note

B. ff-the-run Treasury bond

C. ff-the-run Treasury note

View answer

Correct Answer: C

Question #18

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 #19

Performance Presentation Standards require that income and capital appreciation be presented in addition to total return when dealing with ________.

A. nti-linear appreciation

B. eal estate

C. one of these answers

D. ong-term liabilities

View answer

Correct Answer: B

Question #20

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.

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Correct Answer: A

Question #21

As the alternative mean approaches the hypothesized mean, what can we say about the risk?

A. maller risk of a Type II error

B. reater risk of a Type II error

C. maller risk of a Type I error

D. one of these answers

E. reater risk of a Type I error

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Correct Answer: B

Question #22

What do we call the value called z that is computed using sample data?

A. ecision rule

B. est statistic

C. arameter

D. one of these answers

View answer

Correct Answer: B

Question #23

Supplementary reserves in the form of accounting entries maintained with the IMF by various governments are known as:

A. fficial Reserve Accounts

B. OP funds

C. pecial Depository Receipts

D. pecial Drawing Rights

View answer

Correct Answer: D

Question #24

Suppose you have two assets, A and B. Over the past 3 periods, A has returned 8%, 2%, and 6%, while B has returned 11%, -5%, and 20%. What is the return covariance between assets A and B?

A.

B. 9

C. 0

D. 1

View answer

Correct Answer: B

Question #25

John's great-grandfather left him $50 when he died 80 years ago in an account paying 8% per year, compounded annually. How much would the account hold for John now?

A. 407

B. 24,229

C. 24,113

D. 22,504

E. 23,597

View answer

Correct Answer: E

Question #26

A financial economist runs the following regression: Demand for cars = alpha + beta*income level + error In this regression, the demand for cars is ________ variable and the income level is ________ variable.

A. ependent; dependent

B. ependent; independent

C. ndependent; independent

D. ndependent; dependent

View answer

Correct Answer: B

Question #27

If you buy an item and pay for it with 48 monthly payments of $75, beginning next month, what was the cash price today, if interest accrues at 13% per year, compounded monthly?

A. 575

B. 44

C. 2,795

D. 2,904

E. 2,598

View answer

Correct Answer: C

Question #28

A distribution has a mean equal to 12 and a standard deviation of 36. It has a coefficient of variation equal to:

A. ero

B. one of these answers

C.

D.

View answer

Correct Answer: D

Question #29

In explaining the factors in the dividend discount model that affect a stock's expected price-to-earnings (/) ratio, which of the following statements is least accurate? Holding other factors constant:

A. s the difference between k (required rate of return on the stock) and g (expected constant growth rate of dividends) widens, the value of/decreases

B. s g increases, the value of/increases

C. s the expected dividend payout ratio decreases, the value of/increases

View answer

Correct Answer: C

Question #30

A mortgage holding company has found that 2% 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.

B. one of these answers

C.

D.

E.

View answer

Correct Answer: D

Question #31

What annual deposit would you need to make, beginning one year from today, into an account paying 11% per year, compounded annually, in order to have $1,000,000 in 30 years?

A. 6,129

B. 33,333

C. 418

D. 5,024

E. 1,374

View answer

Correct Answer: D

Question #32

According to the AIMR-PPS, assets to which the Standards cannot be applied are not to be considered by firms when claiming compliance with the Standards. Which of the following is an example of an asset to which the Standards cannot be applied?

A. uaranteed investment contract assets

B. onvertible securities

C. nternational assets

D. ssets managed to more than one base currency

View answer

Correct Answer: A

Question #33

The weights (in kilograms) of a group of crates being shipped to Panama are 95, 103, 110, 104, 105, 112 and92. What is the mean deviation?

A. 2

B.

C.

D. one of these answers

E.

View answer

Correct Answer: B

Question #34

Ten experts rated a newly developed chocolate chip cookie on a scale of 1 to 50. Their ratings were: 34, 35, 41, 28, 26, 29, 32, 36, 38 and 40. What is the mean deviation?

A. 2

B.

C.

D.

E. one of these answers

View answer

Correct Answer: B

Question #35

How many monthly payments of $40 are needed to pay off a debt of $1,000, if interest accrues at 10% per year, compounded monthly?

A. o solution/Error

B. 8

C. 1

D. 7

E. 2

View answer

Correct Answer: B

Question #36

Tom wants to retire a millionaire. If he is 30 years old today, what monthly payment would he need to make beginning one month from today and continuing until he retires on his 65th birthday, if the money will earn 8% per year, compounded monthly?

A. 670

B. 435

C. 2,380

D. 5,803

E. 439

View answer

Correct Answer: B

Question #37

Analysis, Inc. had gross sales of 5,000 last year. Its operating expenses amounted to 339 and cost of goods sold equaled 2,386. Analysis faces a corporate tax rate of 37% and had no other revenues or costs last year.Its net income after taxes was ________.

A. ,647

B. ,433

C. ,275

D. ,308

View answer

Correct Answer: B

Question #38

From tax perspective, which of the following depreciation methods is usually the best?

A. ouble declining

B. odified accelerated

C. traight line

D. um-of-digits

View answer

Correct Answer: A

Question #39

Meriam Mastrani is a senior member of "The Seven Samurai," a high-flying hedge fund. Meriam supervises a group of 6 portfolio managers and is also involved in advising some independent clients. To prevent violations of securities laws at the firm, Meriam has instituted some standard procedures in conjunction with the Compliance Department. However, for the past 6 months, he has been extremely busy catering to his clients to be able to check on the weekly compliance reports. Meriam does not have a deputy who

A. as not violated any standard in the AIMR code of ethics

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

C. iolated Standard III (E) - Responsibilities of Supervisors

D. one of these answers

View answer

Correct Answer: C

Question #40

A cola dispensing machine is set to dispense a mean of 2.02 liters into a container labeled 2 liters. Actual quantities dispensed vary and the amounts are normally distributed with a standard deviation of 0.015 liter. What is the probability a container will have less than 2 liters?

A.

B.

C.

D.

E. one of these answers

View answer

Correct Answer: B

Question #41

When complying with Standard IV (B.3) - Fair Dealing, a change of recommendation from "sell" to "buy" is considered:

A. one of these answers

B. aterial only if so specified prior to the recommendation by the client

C. ot material

D. aterial only if so specified prior to the recommendation by the investment manager

E. enerally material

View answer

Correct Answer: E

Question #42

You are examining the return on equity ratios of the nation's publicly owned companies. You wish to calculate a typical deviation from the average ROE, but you do not have time to gather data on all the firms. What measure should you use?

A. opulation variance

B. ample variance

C. opulation standard deviation

D. ample standard deviation

View answer

Correct Answer: D

Question #43

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

View answer

Correct Answer: B

Question #44

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

A. ash paid for merchandise

B. one of these answers

C. ash received from customers

D. ash paid for taxes

View answer

Correct Answer: B

Question #45

If you need $25,000 in 10 years, how much must you deposit today, if your money will earn 6% per year, compounded annually?

A. 25,000

B. 13,959

C. 2,320

D. 44,771

E. 23,200

View answer

Correct Answer: B

Question #46

Liliana works for Bear Funds, a brokerage firm. Bear has a policy of not allowing its employees to trade in securities in which it has large holdings. A list of such securities is circulated on a daily basis to the employees. Liliana knows of this restriction. However, a few days ago, she happened to purchase a few shares of a firm that are on Bear's restricted list. The total value of the purchase was less than $500. Liliana should

A. one of these answers

B. eport the transaction to the compliance department and see how best to unwind the transaction

C. nform her immediate supervisor about it and accept any sanctions

D. ot do anything, because the activity is of negligible size

View answer

Correct Answer: B

Question #47

What is the present value of $350 per year for 10 years, with the first cash flow occurring today, rather than 1 year from now? Assume interest is 8% per year, compounded annually.

A. 2,408

B. 48

C. 2,536

D. 3,500

E. 2,348

View answer

Correct Answer: C

Question #48

The R-square in a univariate regression measures:

A. he significance of the regression

B. he variance of the error term

C. he amount of variance in the dependent variable caused by the variance in the independent variable

D. he correlation between the dependent and the independent variables

View answer

Correct Answer: C

Question #49

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 #50

A mortgage holding company has found that 3% 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.

B.

C.

D. one of these answers

E.

View answer

Correct Answer: B

Question #51

With regard to calculation of returns for international portfolios, a consistent source of ________ should be used.

A. xchange rates

B. ettlements

C. rades

D. axes

E. isclosures

View answer

Correct Answer: A

Question #52

Bungling, Inc., is currently facing a lawsuit as a defendant. Its honest lawyers estimate that there is a 60-40 chance that Bungling will lose the lawsuit. The jury could award the plaintiff punitive damages ranging from $10,000 to $50,000. Bungling should

A. ot recognize any liability but disclose the details in footnotes

B. ot do anything since the lawsuit is still not decided and considerable uncertainty exists

C. ecognize a liability of $50,000 on its balance sheet as a conservative estimate

D. ecognize a liability of $10,000 on its balance sheet

View answer

Correct Answer: A

Question #53

Since World War II the labor force participation rate (LPR)

A. f women has steadily decreased while the LPR for men has increased

B. f women has steadily increased while the LPR for men has declined

C. f both women and men has increased

D. f both women and men has decreased

View answer

Correct Answer: B

Question #54

In January 1996, Weber Co. purchased a mineral mine for $2,640,000 with removable ore estimated at 1,200,000 tons. After it has extracted all the ore, Weber will be required by law to restore the land to its original condition at an estimated cost of $180,000. Weber believes it will be able to sell the property afterwards for $300,000. During 1996, Weber incurred $360,000 of development costs preparing the mine for production and removed and sold 60,000 tons of ore. In its 1996 income statement, what amount

A. 150,000

B. 132,000

C. 135,000

D. 159,000

E. 144,000

View answer

Correct Answer: E

Question #55

Which of the following can be found in Standard III?

A. embers must use the CFA designation in a dignified manner

B. f members receive material nonpublic information in confidence, they shall not breach that confidence by trading or causing others to trade in securities to which such information relates

C. embers shall maintain knowledge of AIMR's Code of Ethics

D. embers shall comply with any prohibitions on activities imposed by their employer if a conflict of interest exists

E. embers shall make reasonable and diligent efforts to avoid any material misrepresentation in any research report or investment recommendation

View answer

Correct Answer: D

Question #56

An economy which is experiencing substantial inflation and slow economic growth is said to be in:

A. contraction

B. stagflation

C. hyperinflation

D. recession

View answer

Correct Answer: B

Question #57

The number of work stoppages in a highly industrialized region for selected months are: 6, 0, 10, 14, 8 and 0.What is the median number of stoppages?

A.

B.

C.

D.

E. one of these answers

View answer

Correct Answer: A

Question #58

Bond X is a nonmailable corporate bond maturing in ten years. Bond Y is also a corporate bond maturing in ten years, and Bond Y is callable at any time beginning three years from now. Both bonds carry a credit rating of A

A. Based on this information, identify the most accurate statement:

A. ond Y will have a higher nominal spread over a 10-year U

B. he option adjusted spread (OAS) of Bond Y will be greater than the nominal spread of Bond Y

C. he nominal spread of Bond X will be greater than the option adjusted spread of Bond X

View answer

Correct Answer: A

Question #59

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 #60

If you owe a debt of $1,000 today and also owe $2,000 in 24 months, what single payment could you make 15 months from today that would pay off both of these debts, if interest is assessed at 8% per year, compounded monthly?

A. 2,988

B. 2,751

C. 3,041

D. 3,000

E. 1,980

View answer

Correct Answer: A

Question #61

"Horizontal analysis" refers to:

A. omparison of various quantities in a common-sized financial statement

B. omparison of a firm's financial statements with those of a similar firm

C. omparative analysis of financial statements as they evolve over time

D. omparative study of a firm's dependencies on businesses in the different industries in which it is active

View answer

Correct Answer: C

Question #62

What is the present value today of these annual cash flows: $3,000, $2,000, $1,000? Assume the first cash flow occurs 1 year from today and an interest rate of 10% per year, compounded annually.

A. 5,205

B. 5,131

C. 6,089

D. 5,067

E. 6,000

View answer

Correct Answer: B

Question #63

In a large metropolitan area, past records revealed that 30 percent of all the high school graduates go to college. From 20 graduates selected at random, what is the probability that exactly 8 will go to college?

A.

B.

C.

D.

E. one of these answers

View answer

Correct Answer: A

Question #64

The lowest significance level at which the null hypothesis can be rejected is called the:

A. -statistic of the test

B. -value of the test

C. -value of the test

D. ritical value of the test

E. one of these answers

View answer

Correct Answer: C

Question #65

The equity turnover of a firm equals:

A. sset turnover times financial leverage

B. sset turnover times financial leverage and sales to equity ratio

C. et income to equity ratio

D. ales to equity ratio

View answer

Correct Answer: B

Question #66

The opportunity cost of producing a good:

A. enerally decreases as the country produces more and more of the good

B. s not dependent on the marginal cost of producing the good

C. enerally increases as the country produces more and more of the good

D. s usually uniform across countries

E. one of these answers

View answer

Correct Answer: C

Question #67

Which of the following is/are true?

A. or a given level of significance, it becomes harder to reject the null hypothesis as the sample size decreases

B. only

C. I only

D. , II & III

E. II only

View answer

Correct Answer: G

Question #68

Gregory Johansson has collected the following data on Trilby & Tribble, Ltd:The sustainable growth rate of the firm is closest to:

A.

B.

C.

View answer

Correct Answer: C

Question #69

When valuing inventories using the lower-of-cost-or market (LCM), which of the following is/are true?

A. he inventory value cannot exceed the net realizable value

B. & III

C. , II & III

D. I only

E. I & III

View answer

Correct Answer: A

Question #70

If a company receives an unqualified audit opinion, it means the auditors

A. re providing assurance that the company's financial statements are free from misstatement, fraudulent accounting and fairly indicate future performance

B. re providing assurance that the company will remain financially viable for at least the next year

C. re providing assurance that the company's financial statements fairly present company's financial performance and position

D. id not complete a full audit and therefore do not feel qualified to give and opinion on financial statements

View answer

Correct Answer: C

Question #71

What annual interest rate, compounded annually, is equivalent to 9% per year, compounded quarterly?

A. %

B.

C.

D.

E.

View answer

Correct Answer: D

Question #72

The portion of the insurance premiums that has expired during the fiscal period is classified as:

A. n expense

B. n asset

C. n increase in retained earnings

D. liability

View answer

Correct Answer: A

Question #73

Which of the following will most likely occur in the short-run if there is an unanticipated increase in aggregate demand?

A. n increase in output and a higher price level

B. decrease in prices, while output remains unchanged

C. decrease in output and a higher price level

D. decrease in output and a lower price level

E. n increase in output, while prices remain unchanged

View answer

Correct Answer: A

Question #74

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

A. I (E)

B. II (F)

C. (B)

D. V (E)

E. II (A)

View answer

Correct Answer: C

Question #75

Relationships with and Responsibilities to the Employer are dealt with under:

A. tandard II

B. tandard I

C. tandard V

D. tandard III

E. one of these answers

View answer

Correct Answer: D

Question #76

The crowding-out model implies that a

A. udget surplus will be highly effective against inflation

B. udget deficit is likely to stimulate aggregate demand and trigger a multiplier effect that will lead to inflation

C. udget deficit will increase the real interest rate and thereby retard private spending

D. udget surplus will retard aggregate demand and throw the economy into a downward spiral

View answer

Correct Answer: C

Question #77

Type I error refers to the event that we will:

A. ccept the alternative when it is true

B. one of these answers

C. eject the null when it is true

D. ail to reject the null when it is false

E. eject the alternative when it is true

View answer

Correct Answer: C

Question #78

IRK Investments is actively engaged in various risk management strategies involving swaps. The company currently has a position as the fixed rate payer in a quarterly fixed for equity swap with an interest rate of 6.8%, a tenor of five years and notional principal of $10 million. Payments on the swap are netted. The underlying equity return is based on the S&P 500 Index. IRK currently owes a payment of $400,000. Which of the following is most likely correct?

A. he underlying equity index experienced a loss greater than 1

B. he underlying equity index experienced a loss less than 1

C. he underlying equity index experienced a loss equal to 1

View answer

Correct Answer: A

Question #79

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 #80

Which of the following would not be included as a liability on a corporate balance sheet?

A. ccrued liabilities

B. urrent portion of long-term debt

C. ccounts payable

D. arketable securities

E. otes payable

View answer

Correct Answer: D

Question #81

What is the general form of the regression equation?

A. ' = a x bX

B. ' = a - bX

C. ' = a + bX

D. ' = ab

E. one of these answers

View answer

Correct Answer: C

Question #82

If the alternate hypothesis states that u (Mu) does not equal 4,000, what is the rejection region for the hypothesis test?

A. enter

B. one of these answers

C. ower or left tail

D. pper or right tail

E. oth tails

View answer

Correct Answer: E

Question #83

How much must you deposit today if you wish to have $30,000 in 20 years, assuming that interest accumulates at 8% per year, compounded annually?

A. 6,436

B. 7,046

C. 3,000

D. 5,045

E. 6,604

View answer

Correct Answer: A

Question #84

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 satisfactory?

A.

B.

C.

D.

E. one of these answers

View answer

Correct Answer: C

Question #85

A firm has preferred equity outstanding but has not declared payment of dividend on it. If the firm's net income is 1000 and there are 100 common shares outstanding, the firm's Basic EPS is ________.

A. qual to 10

B. nsufficient information

C. ess than 10

D. ore than 10

View answer

Correct Answer: C

Question #86

A joint probability is expressed symbolically as:

A. (A | B)

B. (B | AB)

C. (AB)

D. (A or B)

View answer

Correct Answer: C

Question #87

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 #88

Excerpts from the balance sheet of Milton Corporation as of April 30, 1997 are presented as follows:Cash $725,000Accounts receivable (net) $1,640,000Inventories $2,945,000Total current assets $5,310,000Accounts payable $1,236,000Accrued liabilities $831,000Total current liabilities $2,067,000The board of directors of Milton met on May 5, 1997 and declared a quarterly cash dividend in the amount of $200,000 ($0.50 per share). The dividend was paid on May 28, 1997 to shareholders of record as of May 15, 1997.

A. nchanged by either the dividend declaration or the dividend payment

B. ecreased by the dividend declaration and unchanged by the dividend payment

C. ecreased by the dividend payment and unchanged by the dividend declaration

D. one of these answers

E. ncreased by the dividend declaration and unchanged by the dividend payment

View answer

Correct Answer: B

Question #89

Arvantis works for Quick-time Brokerage. He has not been happy with his employment for some time and recently decided to start his own hedge fund. He started making administrative preparations for setting up the fund while still working for Quick-time Brokerage. He also made contact with a few of his oldest clients and gave them details about his hedge fund. The clients promised to switch accounts once the fund was initiated.Arvantis has:

A. iolated Standard III (B) - Duty to Employer by making preparations to enter a competitive business while still being employed with Quick-time Brokerage

B. only

C. I only

D. and II

E. II only

View answer

Correct Answer: B

Question #90

Roland Cad owns a portfolio of large capitalization stocks. He has a positive long term outlook for the stock market, but Carl is worried about the possible effects of recent changes in monetary policy. Carl would like to protect his portfolio from any sudden declines in the stock market, without selling his holdings. The most likely way for Carl to achieve his objective of limiting the downside risk of his portfolio is to:

A. ell put options on the S&P 500

B. ell an S&P 500 futures contract

C. uy an S&P 500 forward contract

View answer

Correct Answer: B

Question #91

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 net profit margin equals ________.

A.

B.

C.

D.

View answer

Correct Answer: D

Question #92

In hypotheses testing, what is the level of significance?

A. ymbolized by the Greek letter "alpha"

B. ll of these answers are true

C. elected before a decision rule can be formulated

D. alue between 0 and 1

E. isk of rejecting the null hypothesis when it is true

View answer

Correct Answer: B

Question #93

What annual interest rate, compounded annually, is equivalent to 6% per year, compounded monthly?

A.

B.

C.

D. %

E.

View answer

Correct Answer: B

Question #94

What monthly payment, beginning next month, is required over the next 60 months to pay off a $10,000 debt today, if interest is charged at 14% per year, compounded monthly?

A. 116

B. 166

C. 2070

D. 1,400

E. 232

View answer

Correct Answer: E

Question #95

A U.S. investor is considering investing in a security of a company in a developing country. The country's market is characterized by infrequent trading, high inflation, large market volatility, low operating leverage, political unrest, low debt usage, and a depreciating exchange rate. In determining the appropriate country risk premium for the developing country, the investor should consider:

A. iquidity risk, exchange rate risk, financial risk, business risk, balance sheet risk

B. inancial risk, liquidity risk, exchange rate risk, country risk, business risk

C. usiness risk, variability risk, country risk, exchange rate risk, financial risk

View answer

Correct Answer: B

Question #96

Which one of the following will most likely cause a future increase in the growth rate of real output?

A. n increase in income redistribution payments from high- to low-income recipients

B. iscovery of a new low-cost method of converting oil shale into petroleum

C. igher marginal tax rates

D. decrease in the economy's net investment rate

View answer

Correct Answer: B

Question #97

How many monthly payments of $50, beginning next month, are needed to pay off a debt of $700, if interest accrues at 8% per year, compounded monthly?

A. 8

B. o solution/Error

C. 1

D. 2

E. 4

View answer

Correct Answer: E

Question #98

What is the annual Internal Rate of Return of this series of annual cash flows: Year 0: <$20,000>, Year 1:$15,000, Year 2: $5,000, Year 3: $7,500? (Note that the <> are used to indicate a negative number).

A. 0

B. 1

C. 3

D. 8

E. 5

View answer

Correct Answer: B

Question #99

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 #100

Wolfram Hitchwalker is a money manager with Armadillo Investments. He currently manages a few retirement accounts, clients who have a steady current income need and are averse to capital loss. Wolfram recently read a research report which concluded that the stock of HighFly, Inc. was a great buy because of a pending expansion plan into Southeast Asia which would double the profits of HighFly from foreign operations. Wolfram decided that the analysis was sound and that his clients could gain significantly if

A. ot violated any code of ethics since the investment was wise and made his clients better off

B. I and IV only

C. II and IV only

D. only

E. I only

View answer

Correct Answer: A

Question #101

Darlenc Villanueva provides analytical support for portfolio managers at a small investment management firm, Villanueva's latest report highlights two companies, Company X and Company Y. Company X has consistently earned a higher rate of return on assets than their cost of capital, but the stock price is substantially greater than the fair value. Company Y's earnings have been pulled down by the recent economic slowdown, but its stock price has remained stable despite the negative returns on the overall mar

A. tock X is a value stock and Company Y is a defensive company

B. tock X is a growth stock and Company Y is a cyclical company

C. ompany X is a growth company and Stock Y is a defensive stock

View answer

Correct Answer: C

Question #102

You wish to count the number of ways in which n objects can be assigned to k different categories, with n_i members in the ith category. The counting method you should use is:

A. he permutation rule

B. he binomial formula

C. one of these answers is correct

D. he multinomial formula

View answer

Correct Answer: D

Question #103

Which of the following will most likely result in an increase in the per capita GDP of a country?

A. n increase in population

B. mprovement in the average skill level of the labor force

C. n increase in youthful workers as a proportion of the labor force

D. n increase in the number of retired workers

E. n increase in the GDP deflator

View answer

Correct Answer: B

Question #104

An investment of $2,300 grows to $2,904 in 4 years. The annually compounded rate of return is:

A.

B.

C.

D.

View answer

Correct Answer: A

Question #105

The net incomes of a sample of importers were organized into the following table:Net Income (in $ millions) Number of Importers2 - 415 - 748 - 101011 - 13314 - 162What is the mean net income?

A. one of these answers

B. 7

C. 14

D. 9

E. 9

View answer

Correct Answer: D

Question #106

Assume you deposit $800 now into an account that had nothing in it previously, make an additional deposit of $800 in 2 years, and a final deposit of $800 in 4 years. How much is in your account in 5 years, if the account earns interest at 8% per year, compounded annually?

A. 3,047

B. 2,708

C. 4,331

D. 3,120

E. 2,905

View answer

Correct Answer: A

Question #107

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 #108

Free cash flow is not

A. ash flow that includes discretionary uses such as debt reduction

B. he measure of cash available to the firm for discretionary uses after making all required cash outlays

C. etter to have a large sum of

D. efined as cash flow from operations minus all capital expenditures

E. cash flow with one definition because of its several discretionary uses

View answer

Correct Answer: E

Question #109

If high-yield investment opportunities attract capital from abroad and lead to a capital account surplus, then the:

A. ation will also experience a balance of trade surplus

B. ation must run a current account surplus under a pure flexible exchange rate system

C. ation's currency must depreciate

D. ation must run a current account deficit under a pure flexible exchange rate system

E. ation's currency must appreciate

View answer

Correct Answer: D

Question #110

Float refers to:

A. he number of days that a bank will allow a corporation to hold a negative balance in its checking account before charging fees for the negative balance

B. he companies bank balance in excess of its working capital needs

C. he receivable balance on the books of the corporation

D. hecks issued but not yet paid by a bank

View answer

Correct Answer: D

Question #111

The current exchange rate for French francs is $0.20. For a U.S. bank this is an example of:

A. n indirect quote in European terms

B. n indirect quote in American terms

C. direct quote in American terms

D. direct quote in European terms

View answer

Correct Answer: C

Question #112

At December 31, 1995, Del Monte Co. had the following balances in the accounts it maintains at Royal Street Bank:Checking account #101 $175,000Checking account #102 $(10,000)Money market account $25,00090-day certificate of deposit due 2/28/96 $50,000180-day certificate of deposit due 3/15/96 $80,000Del Monte classifies investments with original maturities of 3 months or less as cash equivalents. In its December 31, 1995 balance sheet, what amount should Del Monte report as cash and cash equivalents?

A. 240,000

B. 190,000

C. 320,000

D. 165,000

E. 200,000

View answer

Correct Answer: A

Question #113

Below is an example of an incorrectly prepared statement of cash flows. The descriptions of activities are correct.Cash from operating activities $60,000Net Income (4,000)Depreciation (2,000)Increase in accounts receivable (1,000)Increase in deferred tax liability $53,000Cash from investing activities ($48,000)Purchase of marketable securities 2,500Dividends received 1,500Dividends paid ($44,000)Cash from financing activities (500)Increase in Short-term debt (2,500)Increase in Long-term debt ($3,000)Increas

A. 65,500

B. 63,500

C. 53,500

D. one of these answers

View answer

Correct Answer: A

Question #114

The mean of a normal probability distribution is 500 and the standard deviation is 10. About 95 percent of the observations lie between what two values?

A. one of these answers

B. 75 and 525

C. 80 and 520

D. 50 and 650

E. 00 and 600

View answer

Correct Answer: C

Question #115

A random sample of 85 group leaders, supervisors, and similar personnel revealed that on the average a person spent 6.5 years on the job before being promoted. The standard deviation of the sample was 1.7 years. Using the 0.95 degree of confidence, what is the confidence interval within which the population mean lies?

A.

B.

C. one of these answers

D.

E.

View answer

Correct Answer: E

Question #116

What is the annual Internal Rate of Return of this series of annual cash flows: Year 0: <$25,000>, Year 1:$2,000, Year 2: $0, Year 3: $15,000, Year 4 to indicate a negative number).

A. 0

B. 5

C. 1

D.

E.

View answer

Correct Answer: E

Question #117

Which of the following statements reflects the basic purposes of financial reporting?

A. he best indication of a firm's ability to generate favorable cash flow is information based on previous cash receipts and payments

B. inancial accounting is expressly designed to measure directly the value of a business enterprise

C. one of these answers

D. he primary focus of financial reporting is information about an enterprise's resources

E. nvestments and credit decisions often are based, at least in part, on evaluations of the past performance of an enterprise

View answer

Correct Answer: E

Question #118

What is the Net Present Value of this series of annual cash flows using an interest rate of 15% per year: Year0: <$15,000>, Year 1: $5,000, Year 2: $8,000, Year 3: $11,000? (Note that the <> are used to indicate a negative number).

A. 2,589

B. 3,104

C. 2,981

D. 5,077

E. 2,629

View answer

Correct Answer: E

Question #119

Al the end of the last 12-month period, Romano s Italian Foods had net income and ending equity for the company of $16.68 million and $115 million, respectively. Romano's declared a $7.5 million dividend for the year. Using internally generated funds, Romano's can grow its equity by approximately:

A.

B. 0

C. 4

View answer

Correct Answer: A

Question #120

If you buy an item for $500 and agree to pay for it with 36 monthly payments of $22.22, beginning next month, what annual interest rate, compounded monthly, are you being charged?

A. 7

B. 4

C. 1

D. 3

E. 6

View answer

Correct Answer: D

Question #121

Which of the is/are false?

A. high p-value is necessary to reject a null hypothesis

B. I & III

C. , II & III

D. only

E. I only

View answer

Correct Answer: B

Question #122

The Income Summary account is

A. permanent account

B. n asset

C. temporary account

D. liability

View answer

Correct Answer: C

Question #123

The probabilities and the number of automobiles lined up at a Lakeside Olds at opening time (7:30 a.m.) for service are:Number Probability10.0520.3030.4040.25On average, how many automobiles should Lakeside Olds expect to be lined up at opening?

A. one of these answers

B.

C.

D. 0

E.

View answer

Correct Answer: E

Question #124

Excess kurtosis is a problem for investment researchers using normal distributions because:

A. he likelihood of extreme outcomes will be overestimated

B. istorical returns are better modeled with platykurtic distributions

C. t is difficult to calculate

D. he likelihood of extreme outcomes will be underestimated

View answer

Correct Answer: D

Question #125

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 #126

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

View answer

Correct Answer: F

Question #127

What annual interest rate, compounded annually, will cause an original deposit of $500 to grow to $625, after 3 years?

A.

B.

C.

D.

E.

View answer

Correct Answer: D

Question #128

The following is true about the price earnings ratio

A. t is the ratio between the company's current market value and its earnings per share

B. one of these answers

C. he ratio is calculated based on the earnings per share from the past year

D. tocks with price earnings ratios of 25 or less are considered to be underpriced

View answer

Correct Answer: A

Question #129

In a stratified random sampling method,

A. sample is selected by randomly generating an integer, N, and selecting every Nth member of the population

B. sample is selected by first dividing the population into groups and then selecting members from each group

C. sample is selected by drawing numbers from a normal probability distribution

D. sample selected such that every member of the population has the same chance of being selected

View answer

Correct Answer: B

Question #130

If you deposit $1,500 into an account paying 6% per year, compounded quarterly, how much is in the account after 60 months?

A. 2,224

B. 2,117

C. 2,020

D. 1,702

E. 1,751

View answer

Correct Answer: C

Question #131

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 #132

You are examining a special group of 5 stock market indices. Of these 5, the returns were 4%, 8%, 12%, 16%, and 10%. What is the population variance of this group of stock market indices?

A. 0%

B. 6%%

C. 0%%

D. 6%

View answer

Correct Answer: B

Question #133

Which of the following is a long-term liability?

A. ost of goods sold

B. onds

C. ommercial paper

D. ccounts payable

E. one of these answers

View answer

Correct Answer: B

Question #134

Beginning inventory of 50 units, purchased at $550 units purchased at $1035 units purchased at $925 units sold at $1570 units sold at $12Tax rate = 40%.Beginning LIFO reserve = $300The net income using FIFO is ________.

A. 210

B. 427

C. 309

D. 515

View answer

Correct Answer: C

Question #135

Government borrowing to fund current spending tends to cause _________ to rise. Subsequently, the local currency will _________ causing the trade deficit to rise.

A. avings rate, depreciate

B. ational income, depreciate

C. nflation, depreciate

D. arginal propensity to consume, appreciate

E. nterest rates, appreciate

View answer

Correct Answer: E

Question #136

The probability that a value from a normal distribution will be less than 4 equals 83%. If the distribution has a mean of 2.2, the standard deviation of the distribution must be:

A.

B.

C.

D.

View answer

Correct Answer: C

Question #137

Stockholders' equity may contain all of the following components, except:

A. inimum pension liability

B. inority interests in consolidated subsidiaries

C. mployee Stock Option Plan accruals

D. reasury stock

E. einvested earnings

View answer

Correct Answer: B

Question #138

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 #139

With a discount rate of 12% per year, the value of a perpetuity that pays $500 every year is:

A. 5,231

B. 6,000

C. 4,167

D. 4,756

View answer

Correct Answer: C

Question #140

The creation of bond indexes is relatively new. Which of the following is the least likely reason a bond index would be difficult to create?

A. ack of continuous trading data

B. onstantly changing duration for bonds

C. he universe of bonds is limited

View answer

Correct Answer: C

Question #141

If you deposit $6,000 into an account paying 4% per year, compounded semiannually, how much do you have in the account in 20 years?

A. 13,248

B. 12,667

C. 14,667

D. 7,403

E. 12,204

View answer

Correct Answer: A

Question #142

Various countries' securities laws permit a manager to pay up for goods and services without violating the manager's fiduciary duty, so long as the requirements of the law are followed. Each of the following are typical requirements, except

A. he manager's soft-dollar practice must be disclosed

B. he compensation received for engaging in the paying up must be reported in writing to the manager's employer

C. he commission paid must be reasonable in relation to the research and execution services received

D. he goods or services purchased must be for "research service

E. t all times, the manager must seek best price and execution

View answer

Correct Answer: B

Question #143

How much will $1,250 become after 7 years at 10% per year, compounded annually?

A. 2,298

B. 1,324

C. 2,435

D. 2,500

E. 2,388

View answer

Correct Answer: C

Question #144

Which of the following is not a characteristic of the normal probability distribution?

A. ell shaped

B. ymmetrical

C. ll of these answers

D. ositively skewed

E. symptotic

View answer

Correct Answer: D

Question #145

Excerpts from the balance sheet of Milton Corporation as of April 30, 1997 are presented as follows:Cash $725,000 Accounts receivable (net) $1,640,000 Inventories $2,945,000 Total current assets $5,310,000 Accounts payable $1,236,000 Accrued liabilities $831,000 Total current liabilities $2,067,000Cash $725,000Accounts receivable (net) $1,640,000Inventories $2,945,000Total current assets $5,310,000Accounts payable $1,236,000Accrued liabilities $831,000Total current liabilities $2,067,000The board of directo

A. nchanged by either the dividend declaration or the dividend distribution

B. nchanged by the dividend declaration and decreased by the dividend distribution

C. ecreased by the dividend declaration and increased by the dividend distribution

D. ncreased by the dividend declaration and decreased by the dividend distribution

E. ncreased by the dividend declaration and unchanged by the dividend distribution

View answer

Correct Answer: A

Question #146

Brad Kit, CFA, is analyzing the broadcasting industry. Kit has narrowed his analysis to Willow Corp. and Vision Inc.Willow Corp. is a media company with a diversified group of leading TV, newspaper, and cable news operations. Revenues and earnings have grown slightly over the past ten years. The company's long-term debt to capital ratio is 40%. During the last recession, the company's earnings remained flat with the prior year. Still, Kit believes that Willow Corp. will have positive earnings surprises over

A. illow Corp

B. illow Corp

C. illow Corp

View answer

Correct Answer: C

Question #147

Given the following four points: (-2, 0), (-1,0), (0,1), (1, 1) and (2, 3)What is the standard error of the regression line estimate?

A. one of these answers

B.

C.

D.

E.

View answer

Correct Answer: C

Question #148

Which of the following is the least accurate description of behavioral finance and related investor bias?

A. voiding or ignoring new information that would call a decision into question is an example of overconfidence bias

B. ehavioral finance may explain some of the anomalies that tend to refute the efficient markets hypothesis

C. ommitting more funds to a position that has lost value is an example of escalation bias

View answer

Correct Answer: A

Question #149

Under a flexible exchange rate system, a nation that offers more attractive investment opportunities than its trading partners can expect to run a

A. alance of merchandise trade surplus

B. eficit on its capital account transactions

C. urplus on current account transactions

D. eficit on current account transactions

View answer

Correct Answer: D

Question #150

Which of the following is NOT true about Standard IV (

A. ) - Research Reports?

A. one of these answers

B. he analyst must separate fact from statistical conjecture to be in compliance with the standard

C. s long as the analyst has carried out adequate investigation, she can omit from the report certain aspects of the investigations that she deems unimportant

D. he report must contain a basic description of the characteristics of the investment under consideration

View answer

Correct Answer: A

Question #151

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 #152

If a restrictive fiscal policy places downward pressure on real interest rates, we would expect

A. ll of these answers are correct

B. nflationary pressures to increase

C. n increase in the dollar

D. n outflow of capital

E. n increase in the budget deficit

View answer

Correct Answer: D

Question #153

Gretchen Miller has been analyzing options on the common stock of Spirit Electronics Group (SEG), which last traded on the NASDAQ for $25.96. Miller has collected the following data on put options for SEG stock that expire in three months:_______________StrikePut_______________22.500.2525.000.6527.502.00______________Miller has been asked by her supervisor to determine the profit on a protective put strategy using a strike price of $25.00 if the stock price is $27.13 on the option expiration date. What figu

A. 0

B. 0

C. 0

View answer

Correct Answer: B

Question #154

According to GAAP classification of cash flows, all of the following are investing cash flows except:

A. urchase of an office building

B. ains on asset sales

C. ividends received from investments in stocks

D. akeovers financed partly with cash

View answer

Correct Answer: C

Question #155

What semiannual deposit is needed to accumulate $8,000 in 5 years if the account pays 7% per year, compounded semiannually, assuming that the first deposit is made in 6 months and also assuming that the account already has $1,250 in it today?

A. 336

B. 677

C. 559

D. 278

E. 531

View answer

Correct Answer: E

Question #156

When a plant asset is sold for more than its book value:

A. ash received plus accumulated depreciation plus gain on disposal equals the original cost

B. ash received plus accumulated depreciation minus gain on disposal equals the original cost

C. ook value of the asset minus gain on disposal equals cash received

D. riginal cost minus accumulated depreciation equals cash received plus gain on disposal

View answer

Correct Answer: B

Question #157

How much must you deposit today if you wish to have $60,000 in 10 years, assuming that interest accumulates at 10%, compounded annually?

A. 20,153

B. 21,500

C. 9,143

D. 26,474

E. 23,132

View answer

Correct Answer: E

Question #158

According to the New Classical View, ________ is unaffected by deficits since people will save more money in order to pay the higher future taxes.

A. he real interest rate

B. he marginal tax rate

C. rice equalization

D. he supply-side

E. iscal policy

View answer

Correct Answer: A

Question #159

"Prohibited transactions" are discussed in Standard IV (B.4), Priority of Transactions. Which of the following is NOT suggested as a firm policy?

A. one of these answers

B. articipation by investment personnel in equity should be restricted

C. irms must determine specific requirements relating to blackout period

D. ll individuals who are involved in the investment decision-making process should be subject to the same restricted period

View answer

Correct Answer: A

Question #160

Judging from recent experience, 5 percent of the worm gears produced by an automatic, high speed machine are defective. What is the probability that out of six gears selected at random, exactly zero gears will be defective?

A.

B.

C.

D.

E. one of these answers

View answer

Correct Answer: C

Question #161

Hupta Corporation reports cost of goods sold for the year ended December 31, 1998 of $3,500. Other information as of December 31 is as follows:1997 1998Accounts Receivable $500 $550Inventory $400 $380Accounts Payable $250 $290Cash paid to suppliers for year ended December 31, 1998 is ________.

A. 3,520

B. 3,480

C. 3,440

D. 3,560

View answer

Correct Answer: C

Question #162

Which of the following is the best example of a quota?

A. tax placed on all small cars sold in the domestic market

B. limit imposed on the number of men's suits that can be imported from a foreign country

C. $100-per-car excise tax levied on all small cars sold in the domestic market

D. subsidy from the U

E. $100-per-car fee imposed on all small cars imported

View answer

Correct Answer: B

Question #163

When purchased, plant assets are recorded at ________.

A. uture value

B. arket value

C. ower of cost or market

D. ost

View answer

Correct Answer: D

Question #164

In order to inform your employer that as a member of AIMR, you must abide by the code of ethics, you must:

A. nform the legal department in writing

B. nform senior management in writing

C. nform your immediate supervisor in writing or by email

D. nform your supervisor in writing, by email or orally

View answer

Correct Answer: C

Question #165

Unearned Revenue is classified as

A. liability

B. contra account

C. n operating expense

D. evenue

View answer

Correct Answer: A

Question #166

Johnny deposited a check he received from his Aunt when he was 10 years old into an account paying 10% per year, compounded monthly. If the original check was for $100, how much does Johnny have in his account today, 50 years later?

A. 151

B. 5,905

C. 58,304

D. 100

E. 14,536

View answer

Correct Answer: E

Question #167

Which is true of positively skewed distributions?

A. hey are not symmetrical

B. and II

C. and III

D. one of these answers is correct

E. I and III

View answer

Correct Answer: C

Question #168

Which of the following relationship is true about the liquidity ratios?

A. ash ratio > Quick ratio > Current ratio

B. uick ratio > Cash ratio > Current ratio

C. ash ratio < Quick ratio < Current ratio

D. ash ratio < Current ratio < Quick ratio

View answer

Correct Answer: C

Question #169

Mayberry's Mayor, in consultation with the trustees of Mayberry's Village Investment Fund, has decided that the fund needs to become more aggressive in its investment objectives to generate funds for village renovations like a paved road, a new school and an activity center for kids. He discussed these requirements with the plan manager, Otis, and asked him to suggest a suitable risk profile and investment instruments to achieve the objectives within a year. Barney, a businessman from a neighboring town, is

A. arney has violated the Code of Ethics by discussing the plans with Otis

B. I only

C. II only

D. and II only

E. only

View answer

Correct Answer: A

Question #170

Which of the following is NOT a measure of a firm's liquidity?

A. nterest coverage

B. nventory turnover

C. uick ratio

D. eceivables turnover

View answer

Correct Answer: A

Question #171

When complying with Standard IV (B.3) - Fair Dealing, there are certain points one should be sure to address when establishing compliance procedures. Which of the following points is NOT mentioned in the Standards of Practice Handbook?

A. isclose levels of service

B. imit the number of people involved

C. horten the time frame between decision and dissemination

D. stablish procedures for determining material change

E. imultaneous dissemination

View answer

Correct Answer: F

Question #172

The Income Statement:

A. eflects the current operating performance of the firm

B. , II & IV

C. I & III

D. , II, III & IV

E. only

View answer

Correct Answer: D

Question #173

In a regression, the independent variable explains 79% of the variance in the dependent variable, leaving 21% unexplained. The slope coefficient is 0.67 and the intercept equals -10.2 The correlation coefficient between the two variables is

A.

B.

C.

D. 0

View answer

Correct Answer: B

Question #174

A random variable with a mean equal to 2.5 and a standard deviation of 2.0 has a coefficient of variation equal to ________.

A. ero

B. 2

C.

D. one of these answers

E.

View answer

Correct Answer: E

Question #175

Assume the least squares equation is Y' = 10 + 20X. What does the value of 20 indicate?

A. or each unit increased in Y, X increases by 20

B. intercept

C. one of these answers

D. or each unit increased in X, Y increases by 20

View answer

Correct Answer: D

Question #176

What are the critical values for a two-tailed test of hypothesis test if alpha = .01?

A. /- 1

B. /- 2

C. /- 1

D. one of these answers

E. /- 2

View answer

Correct Answer: B

Question #177

Suppose that stocks A, B, C, and D are independent with respect to their price movement, and have probabilities of increasing of 0.25, 0.50, 0.40, and 0.30. What is the probability that stocks A and C will increase in price? In other words, find P(AC).

A.

B. 1%

C. 0%

D.

View answer

Correct Answer: C

Question #178

The primary cause of frictional unemployment is

A. luctuations in aggregate demand

B. he lack of training and marketable qualifications in job seekers

C. naccurate and costly information about job opportunities

D. igh unemployment benefits that reduce the incentive of unemployed workers to seek work

View answer

Correct Answer: C

Question #179

Financial accounting data has some inherent limitations. Which of the following are limitations?

A. ot all economic events are easily quantifiableII

B. I, III and IV

C. , II and III

D. , III and IV

E. , II, III and IV

View answer

Correct Answer: D

Question #180

At the beginning of fiscal 1998 Jones Company had retained earnings of $1,000,000 and at the beginning of fiscal 1999 Jones Company had retained earnings of $1,200,000. During fiscal 1998 Jones Company declared a dividend of $300,000 and declared a 3 for 1 stock split. How much did Jones Company earn during fiscal1998?

A. 200,000

B. 166,667

C. 600,000

D. 500,000

View answer

Correct Answer: D

Question #181

According to the Prudent Investor Rule, the trustee must: - adhere to loyalty, impartiality and prudence - maintain overall portfolio risk at a reasonable level - provide for reasonable ________ of trust investments - act with prudence in deciding whether and how to delegate authority to experts and in selecting and supervising agents - be cost conscious when investing

A. upervision

B. ommitment

C. iversification

D. one of these answers

View answer

Correct Answer: C

Question #182

A financial auditor's report is required to:

A. ake sure that no fraudulent activity is occurring with the accounting systems

B. & IV

C. , III & IV

D. , II & III

E. I & III

View answer

Correct Answer: D

Question #183

A random variable, X, has a mean of 10 and a standard deviation of 15. Another random variable, Y, is defined by Y = 2X + 3. Then, which of the following is/are true? I. The mean of Y is 33. II. The variance of Y is 30. III. The standard deviation of Y is 33. IV. X and Y are perfectly correlated.

A. I and IV

B. , II and IV

C. I only

D. II and IV

E. V only

View answer

Correct Answer: E

Question #184

John's great-grandfather left him $100 when he died 100 years ago in an account paying 5% per year, compounded annually. How much would the account hold for John now?

A. 12,504

B. 13,150

C. 14,229

D. 8,407

E. 14,113

View answer

Correct Answer: B

Question #185

An increase in accounts payable would be considered ________.

A. non-cash charge to income

B. n adjusting entry

C. use of cash

D. source of cash

View answer

Correct Answer: D

Question #186

At the end of a fiscal period, any revenue that has been earned but the company has not received payment for should be debited to an appropriate

A. sset account

B. xpense account

C. iability account

D. evenue account

View answer

Correct Answer: A

Question #187

What annual deposit would you need to make, beginning in one year, into an account paying 7% per year, compounded annually, in order to have $50,000 in it after 20 years, assuming that the account has nothing in it today?

A. 1,129

B. 1,219

C. 4,719

D. 1,291

E. 2,191

View answer

Correct Answer: B

Question #188

All of the following would be considered financing activities except for:

A. ividends payable

B. otes payable to bank

C. urrent portion of long-term debt

D. oans receivable (ex

View answer

Correct Answer: D

Question #189

If the one month FF/$ exchange rate is 8.0200-50 this implies:

A. he bank is willing to commit itself today to sell dollars in one month for 8

B. he bank is willing to commit itself today to buy dollars in one month for 8

C. he bank is willing to commit itself today to buy dollars for 8

D. he bank is willing to commit itself today to buy dollars in one month for 8

E. one of these answers

View answer

Correct Answer: B

Question #190

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 #191

What is a Type II error?

A. ejecting a false alternative hypothesis

B. ccepting a false null hypothesis

C. one of these answers

D. ccepting a false alternative hypothesis

E. ejecting a false null hypothesis

View answer

Correct Answer: B

Question #192

Standard III (B) deals with ________.

A. se of Professional Designation

B. undamental Responsibilities

C. rofessional Misconduct

D. isclosure of Conflicts to Employer

E. one of these answers

View answer

Correct Answer: F

Question #193

In a beer taste study involving the ExtraFerm lager beer, the following responses were recorded:Response FrequencyGreat taste 103Okay taste 46Bad taste 64The probability that a randomly selected beer drinker will NOT find ExtraFerm to be bad tasting is calculated from these data to be:

A.

B.

C.

D.

View answer

Correct Answer: C

Question #194

There are two stocks in an index:Nothing has changed except now the price of Company A's stock is selling for $4 per share. What is the price- weighted index and what is the value-weighted index?

A. rice-weighted = 8; Value-weighted =2

B. rice-weighted = 10; Value-weighted = 1

C. rice-weighted = 7; Value-weighted = 1

D. rice-weighted = 6; Value-weighted = 0

View answer

Correct Answer: C

Question #195

Examples of Common Stock Equivalents (CSE's) include all of the following except:

A. tock options

B. reasury stock

C. arrants

D. onvertible preferred stocks that have an effective yield of less than two-thirds of the average Aa corporate bond yield at the time of issuance

View answer

Correct Answer: B

Question #196

If you deposit $1,111 a year, beginning next year, for 20 years into an account paying 7% per year, compounded annually, how much is in your account after that last deposit?

A. 50,598

B. 47,003

C. 45,545

D. 30,118

E. 48,304

View answer

Correct Answer: C

Question #197

Suppose that the Central Bank announces that it will increase the money supply by 5%. Producers collectively determine that this will cause a 5% increase in both the price of their products and the cost of their inputs. How will this impact real GDP?

A. ncrease by more than 5% in the short-run

B. ncrease by an indeterminate degree in the short-run

C. annot determine without knowing whether GDP is below potential

D. ncrease by less than 5% in the short-run

E. ncrease by 5%

View answer

Correct Answer: F

Question #198

Capital account transactions include:

A. irect investments by Americans in real assets abroad and loans from foreigners

B. irect investments by Americans in real domestic assets and loans to and from foreigners

C. nilateral transfers to and from foreigners and direct investments by Americans in real assets abroad

D. irect investments by Americans in real assets abroad and loans to and from foreigners

E. nilateral transfers to and from foreigners and loans to and from foreigners

View answer

Correct Answer: D

Question #199

When preparing a direct method statement of cash flows, the calculation of equity financing cash flows requires analysis of the change in stockholders' equity, separating all of the following except

A. nvestments in affiliates

B. ividends declared

C. et income

D. hares issued/repurchased

E. hanges in valuation accounts

View answer

Correct Answer: A

Question #200

Arditti manages the pension plan for a publicly traded firm, Eros Computers and in this capacity, has the right to vote 0.5% of the common shares outstanding. Recently, Eros wanted to expand its production operations into Latin America and the board had decided to put the matter for open vote from shareholders. Arditti was on vacation in Fiji at the time and when she was informed about the vote, instructed that the portfolio proxy votes be voted along the same lines as that favored by the senior management.

A. iolated Standard IV (B

B. and II

C. , II and III

D. only

E. I and III only

View answer

Correct Answer: A

Question #201

Standard III (B) is ________.

A. one of these answers

B. isclosure of Additional Compensation Arrangements

C. esponsibilities of Supervisors

D. isclosure of Conflicts to Employer

E. bligation to Inform Employer of Code and Standards

View answer

Correct Answer: F

Question #202

Standard III (D) - Disclosure of Additional Compensation Arrangements - requires members to provide complete disclosure to their employer about any additional compensation arrangements. In order to abide by this, you must:

A. nform the legal department in writing

B. nform your immediate supervisor in writing or by email

C. nform senior management orally or in writing

D. nform your supervisor in writing, by email or orally

View answer

Correct Answer: B

Question #203

Accounting rules specify that interest must be capitalized for assets that are

A. ot being used in the earning activities of the enterprise and not undergoing the activities necessary to get them ready for use

B. outinely produced

C. eing constructed or otherwise being produced as discrete projects for an enterprise's own use

D. one of these answers

E. n use or ready for their intended use in the earning activities of the enterprise

View answer

Correct Answer: C

Question #204

On November 15, 2006, the yield curve was upward sloping with yields of 3%, 4%, and 5.5% on 1-year, 5-year, and 10-year Treasuries, respectively. The following day, the Treasury yield curve experienced an upward parallel shift equal to 112 basis points. Which of the following noncallable bonds would have experienced the least percentage change in price as a result of the yield curve shift?

A. 6% coupon corporate bond maturing in ten years

B. 6% coupon corporate bond maturing in five years

C. 0% coupon U

View answer

Correct Answer: B

Question #205

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 #206

Birch Ltd. had net income for the year of $101,504 and a simple capital structure consisting of the followingcommon shares outstanding:Months OutstandingNumber of SharesJanuary February 24,000March June 29,400July November 36,000December 35,040Assume Birch issued a 20% stock dividend on August 1st. In this case, earnings per share (rounded to the nearest cent) were

A. 2

B. 2

C. 2

D. 4

E. 2

View answer

Correct Answer: B

Question #207

Horace Lance, CFA, states that the efficient market hypothesis and its rigorous testing have yielded many benefits to investors. Lance makes the following statements concerning an efficient market. Statement I:The Efficient Market Hypothesis (EMH) assumes that changes in security prices occur in a random fashion.Statement 2:Portfolio managers should reduce trading turnover of client accounts. Statement 3:The EMH establishes that the expected rate of return is the risk-free rate plus a risk premium that is t

A. tatement 1

B. tatement 2

C. tatement 3

View answer

Correct Answer: C

Question #208

Cricketers, Inc. recently purchased Baseball Corp. for $3 million using debt financing. Analysts are in agreement that the fair value for Baseball's assets was around $2.7 million and that the overpayment was for strategic reasons. When Cricketers' accountants record the transaction, they must record:

A. n asset of $2

B. n asset of $3

C. n asset of $2

D. n asset of $2

View answer

Correct Answer: C

Question #209

The mean weight of trucks traveling on a particular section of I-475 is not known. A state highway inspector needs an estimate of the mean. He selects a random sample of 49 trucks passing the weighing station and finds the mean is 15.8 tons, with a standard deviation of the sample of 3.8 tons. What is the 95 percent interval for the population mean?

A. 4

B. 6

C. 0

D. one of these answers

E. 3

View answer

Correct Answer: A

Question #210

Which of the following is/are a correct statement of a member's duty under the Code and Standards?

A. n the absence of specific applicable law or other regulatory requirements, the Code and Standards govern the member's actions

B. only

C. II only

D. and II only

E. I and III only

View answer

Correct Answer: A

Question #211

Abra, a vice-president at Mahogany, Inc., recently revealed - quite inadvertently - information about the tender offer from Mahogany to Kadabra, his friend who works for a rival firm. Kadabra, in turn, shared this information with his trading buddy, Cosmo. Cosmo immediately recognized that in light of this information, he was better off not participating in the offer. He went ahead and shorted the stock of Mahogany and reaped a tidy profit of about a hundred thousand dollars in a month's time when Mahogany

A. osmo can be held liable for insider trading under SEC Section 10(b) and Rule 10b-5

B. , II, III & IV

C. only

D. one of these answers

E. II only

View answer

Correct Answer: C

Question #212

Which of the following is/are true about pension plans?

A. n a defined benefit plan, the investment risks are borne by the employer

B. & II

C. I only

D. , II & III

E. & III

View answer

Correct Answer: C

Question #213

For a negatively skewed, unimodal distribution, which of the following relationships holds?

A. ode < median

B. ean > median

C. ean < median

D. ean > mode

View answer

Correct Answer: C

Question #214

Complete the following: According to The Code of Ethics, members of AIMR shall: "Act with ________, competence, dignity and in an ethical manner when dealing with the public, clients, prospects, employers, employees and fellow members."

A. irtue

B. one of these answers

C. onorability

D. ntegrity

E. orality

View answer

Correct Answer: D

Question #215

The value of a real estate portfolio requires, at minimum, ________ review.

A. eekly

B. uarterly

C. aily

D. onthly

E. nnual

View answer

Correct Answer: B

Question #216

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 #217

What deposit today is needed to have $4,000 in 4 years, assuming the money will earn interest at 5% per year, compounded monthly?

A. 3,290

B. 3,276

C. 4,000

D. 384

E. 3,934

View answer

Correct Answer: B

Question #218

The ________ states that broker/dealers should be subject to strict standards because they are advertising themselves as market professionals.

A. over canon

B. anopy principle

C. osting criterion

D. hingle theory

E. arketing regulation

View answer

Correct Answer: D

Question #219

On Jan 1, a firm had 700 stocks outstanding. On May 1, it issued 300 more shares. On October 1, it repurchased 100 shares. If the firm's net income was 12,000 and it paid a preferred dividend of 1,400, its reported EPS is ________.

A. 2

B. 0

C. 1

D. 2

View answer

Correct Answer: D

Question #220

Topaz Metals Inc. produces precious metals from its mining operations. The selling price for its product is reasonably assured, the units are interchangeable, and the costs of selling and distributing the product are insignificant. In order for Topaz to recognize revenue as early in the revenue cycle as is permitted under generally accepted accounting principles, the revenue recognition method that Topaz should use is the ________.

A. ercentage-of-completion method

B. roduction method

C. ash method

D. ompleted-contract method

E. ost recovery method

View answer

Correct Answer: B

Question #221

Giorgio offers the person who purchases an 8 ounce bottle of Allure two free gifts, either an umbrella, a 1 ounce bottle of Midnight, a feminine shaving kit, a raincoat or a pair of rain boots. If you purchased Allure what is the probability you selected at random an umbrella and a shaving kit in that order?

A. one of these answers

B.

C.

D.

E.

View answer

Correct Answer: D

Question #222

What quarterly payment would you have to make to pay off a $5,000 debt in 7 years, assuming the first payment is made 3 months from today and interest accrues at 6% per year, compounded quarterly?

A. 220

B. 72

C. 145

D. 372

E. 757

View answer

Correct Answer: A

Question #223

When dealing with charitable organizations, the fiduciary must consider all of the following, except:

A. eneral economic conditions

B. he charity's present and anticipated financial requirements

C. nvestigation of supervisory activities once violation is known to have occurred

D. ong and short-term institutional needs in carrying out the charitable purpose

E. xpected total return on its investments

View answer

Correct Answer: C

Question #224

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 #225

Standard III of the Standards of Professional Conduct deals with Relationships with and Responsibilities to ________.

A. IMR

B. lients and Prospects

C. one of these answers

D. he Employer

View answer

Correct Answer: D

Question #226

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

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

B. two-tailed test

C. one of these answers

D. right-tailed test

E. left-tailed test

View answer

Correct Answer: D

Question #227

Suppose you need $500 in 9 months. How much must you deposit today, if the deposit will earn interest at 6% per year, compounded monthly?

A. 522

B. 478

C. 381

D. 295

E. 291

View answer

Correct Answer: B

Question #228

Which of the following would affect both net income and cash flow from operations?

A. redit sale to a customer

B. ale of marketable security for a gain

C. nterest payment on capitalized interest

D. one of these answers

View answer

Correct Answer: D

Question #229

You wish to determine the number of unique combinations that can result from a process that involves n_1 options in one respect, n_2 in another respect, and so on. The counting method you should use is:

A. he binomial formula

B. he multiplication rule

C. he multinomial formula

D. he permutation rule

View answer

Correct Answer: B

Question #230

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

A. llowance for Uncollectible Accounts

B. one of these answers is correct

C. ccounts Receivable

D. ad Debt Expense

E. nearned Revenue

View answer

Correct Answer: D

Question #231

Which of the following is/are true about held-to-maturity securities?

A. hey are mostly non-current assets

B. I only

C. I & III

D. & III

E. , II & III

View answer

Correct Answer: C

Question #232

Which of the following would be considered a liability that arises from financing activities?

A. ccounts payable

B. ccrued wages

C. otes payable

D. axes payable

E. one of these answers

View answer

Correct Answer: C

Question #233

Countries A and B have the same monetary base and reserve requirement. People in A tend to hold more currency than people in B. The money supply will be:

A. igher in B

B. ame in the two countries

C. nsufficient information

D. igher in A

View answer

Correct Answer: A

Question #234

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

View answer

Correct Answer: F

Question #235

Karen Callaway is an investor in the 35% tax bracket. She is evaluating a tax-exempt municipal security with a tax-exempt yield of 4.5%. What is the taxable equivalent yield (TEY) of the municipal security?

A.

B.

C. 2

View answer

Correct Answer: C

Question #236

Standard V (B) deals with ________.

A. one of these answers

B. riority of Transactions

C. reservation of Confidentiality

D. erformance Presentation

E. rohibition against Use of Material Nonpublic Information

View answer

Correct Answer: D

Question #237

All of the following statements are true except for:

A. hen inventory balances decrease, cash flows increase

B. hen short-term debt increases, cash flows increase

C. hen accounts receivable balances increase, cash flows increase

D. hen accounts payable balances increase, cash flows increase

View answer

Correct Answer: C

Question #238

Procedures for compliance with Standard I include ________.

A. ctivities relating to interns and people under contract

B. eep informed

C. hen you suspect illegal activity, determine legality

D. hen you suspect illegal activity, dissociate from that activity

E. ll of these answers

View answer

Correct Answer: E

Question #239

Jack Hare, CFA, is a fixed income analyst. Hare is evaluating a 15-year zero-coupon bond, which is priced at $30.83. Determine the issue's approximate yield to maturity.

A. %

B. %

C. %

View answer

Correct Answer: C

Question #240

Which of the following statements is true?

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

B. eferral is the process of formally recording or incorporating an item in the financial statements of an entity

C. ealization would reduce a liability that is recorded as a result of a cash receipt by recognizing revenues

D. llocation is the process of converting non-cash resources and rights into money

E. ccrual is the process of recognizing assets, liabilities, and components of comprehensive income

View answer

Correct Answer: E

Question #241

What is the annual Internal Rate of Return of this series of annual cash flows: Year 0: <$15,000>, Year 1:$5,000, Year 2: $8,000, Year 3: $11,000? (Note that the <> are used to indicate a negative number).

A. 7

B. 3

C. 5

D. 6

E. 4

View answer

Correct Answer: E

Question #242

If AIMR Members, CFA Charterholders and Candidates do not follow the AIMR Performance Presentation Standards and they make material misrepresentations, they will be in violation of what Standard of Professional Conduct?

A. tandard V (A)

B. one of these answers

C. tandard I

D. tandard V (B)

View answer

Correct Answer: D

Question #243

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 #244

Warranty liabilities:

A. re estimated liabilities

B. ust also result in an expense during the same period as the revenue from the sale of the product

C. esult when a company sells a product

D. ll of these answers

View answer

Correct Answer: D

Question #245

Morgan Inc. was organized on January 2, 1997 with the following capital structure:10% cumulative preferred stock, par value $100 and liquidation value $105; authorized, issued and outstanding 1,000 shares, $100,000Common stock, par value $25; authorized 100,000 shares;Issued and outstanding 10,000 shares, $250,000Morgan had net income of $450,000 for its first year, but no dividends were declared. How much was Morgan's book value per common share at December 31, 1997?

A. 68

B. 70

C. 25

D. 45

E. 69

View answer

Correct Answer: A

Question #246

If the level of confidence is lowered from 95% to 90%, but the allowable error and the standard deviation remain the same, what happens to the required sample size?

A. one of these answers

B. ecreases

C. ncreases

D. emain unchanged

View answer

Correct Answer: B

Question #247

Which of the following is true in a normal distribution?

A. one of the answers

B. ll of these answers are correct

C. ean divides the distribution into two equal parts

D. ean equals the mode and the median

E. ode equals the median

View answer

Correct Answer: B

Question #248

A stock's return has a mean of 6% and a coefficient of variation of 2. Its variance equals

A. 44%%

B. %%

C. %%

D. 2%%

View answer

Correct Answer: A

Question #249

The following data have been extracted from the financial statements of a firm for two years, 1993 and 1994:1993 1994Assets 10,895 12,444Sales 8,465 9,275Inventory 3,126 3,549COGS 7,120 7,387Receivables 2,154 1,768The receivables turnover ratio and the average receivables collection period for 1994 equal ________.

A.

B.

C. one of these answers

D.

View answer

Correct Answer: D

Question #250

Which of the following statements best describes the relationship between a valuation factor and its effect on the present value of a bond, holding all else constant?

A. sing a lower discount rate will generate a lower present value

B. bond with a lower coupon rate will have a higher present value

C. sing a higher discount rate will generate a lower present value

View answer

Correct Answer: C

Question #251

Extraordinary items are placed on the income statement:

A. fter net income from continuing operations and net of tax

B. s a footnote to the statement as they are 1 time items and are not a part of the normal course of business for a corporation

C. ithin income from operations net of tax

D. fter net income from continuing operations and before taxes

View answer

Correct Answer: A

Question #252

A relative frequency distribution is

A. ll of these answers

B. collection of relative frequency classes with the relative frequencies

C. grouping of data into non-overlapping categories

D. n aggregation of raw data in the form of a probability distribution

View answer

Correct Answer: A

Question #253

Valuation of PP&E and natural resources emphasizes all of the following accounting objectives except ________.

A. ccounting for monies invested in assets

B. istorical cost

C. onservatism principle

D. eality

View answer

Correct Answer: D

Question #254

Wireless Company received venture capital financing that allowed the company to begin commercial manufacturing. This stage of financing is known as:

A. irst-stage

B. econd-stage

C. hird-stage

View answer

Correct Answer: A

Question #255

Howard Keane is a strategist for Dove Investments. His models indicate that the expected inflation rate will be 3.0%. The real rate of return on the S&P 500 index is expected to be 8.7%, while the real rate of return on U.S. Treasury notes is expected to be 1.0%. Howard is interested in the current equity risk premium. Based on the information above, the equity risk premium is closest to:

A. %

B. %

C. %

View answer

Correct Answer: C

Question #256

Which one of the following is referred to as the population mean?

A. ample

B. -Bar

C. he Greek letter "Mu"

D. tatistic

E. one of these answers

View answer

Correct Answer: C

Question #257

If you deposit $300 a month, beginning next month, for 10 years into an account paying 8% per year, compounded monthly, how much is in your account after that last deposit?

A. 38,444,973

B. 30,000

C. 54,883

D. 3,091

E. 58,402

View answer

Correct Answer: C

Question #258

Which of the following would be classified a cash inflow from investing activities?

A. ash paid to retire bonds

B. roceeds from issuing stock

C. ash paid for dividends

D. roceeds from selling investments in the equity securities of other companies

View answer

Correct Answer: D

Question #259

If all the 10,000 data points in a regression lie exactly on a straight line, which of the following is/are true?

A. he intercept term is zero

B. II only

C. V only

D. I & IV

E. II & IV

View answer

Correct Answer: E

Question #260

The domestic demand Q for a good A at a price P is given by Q = 500 - 5P while the supply function is given by 300 + 3P. The world price for good X is 19.If the government imposes a 10% tariff on imports, the revenues of the domestic producers will

A. ecrease by 233

B. ncrease by 579

C. ncrease by 797

D. ecrease by 485

View answer

Correct Answer: C

Question #261

In graphs of return performance, which of the following scales is commonly used?

A. xponential scale

B. emi-logarithmic scale

C. rithmetic scale

D. og-normal scale

View answer

Correct Answer: B

Question #262

According to the AIMR-PPS, systems incompatibilities

A. auses distortion of performance presentation and needs to be disclosed

B. re one reason for which a firm may not claim compliance for all assets

C. annot be used as a reason for not claiming compliance for all assets

D. ender a firm unable to claim compliance with the PPS, thus the firm should ensure compatibility

View answer

Correct Answer: C

Question #263

Which of the following best describes an income statement?

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

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

C. one of these answers

D. t reports investment activities for a specified accounting period

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

View answer

Correct Answer: A

Question #264

Which of the following is/are true about a standard normal distribution?

A. t has zero skewness

B. , II, III and IV

C. & III

D. I only

E. II only

View answer

Correct Answer: B

Question #265

Which of the following is/are TRUE?

A. he cash flow from operations are higher when expenses are capitalized

B. I, III & IV

C. , II, III & IV

D. II & IV

E. & III

View answer

Correct Answer: D

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