Achieve Remarkable Results in the CFA Level I Exam with Reliable Study Materials

Question #1

If a firm recognizes expenses before that dictated by accrual accounting, which of the following best describes the effects on income, total assets and retained earnings?Income Total Assets Retained Earnings

A. nderstated Understated UnderstatedII

B. II

C. V

D.

E. I

View answer

Correct Answer: C

Question #2

New Gestalt, Inc., a software firm had a net income of 1.7 million last year. It has 200,000 common shares and 300,000 convertible bonds with face value of 100 outstanding. The convertible bonds carry a coupon of 4% and can be converted one-for-one. The average stock price last year was 39 and the maximum price was 57. The effective interest rate on the convertible debt is 8%. New Gestalt issued 100,000 preferred shares with face value 100 and a coupon of 5% on March 31st of last year. Assume the convertibl

A. 00,000

B. 23,077

C. 12,648

D. 00,000

View answer

Correct Answer: B

Question #3

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

A. he call writer has the maximum loss exposure

B. he put buyer has the maximum loss exposure

C. he put writer has the maximum potential gain

View answer

Correct Answer: A

Question #4

A true-false test consists of six questions. If you guess the answer to each question, what is the probability of getting all six questions correct?

A. one of these answers

B.

C.

D.

E.

View answer

Correct Answer: E

Question #5

Which is true of all skewed distributions?

A. hey are is not symmetrical

B. and III

C. one of these answers is correct

D. and II

E. I and III

View answer

Correct Answer: C

Question #6

The statement of cash flows cannot be used to

A. onsider the interrelationship between cash flow components over time

B. xamine the trend of different cash flow components over time

C. xamine the cash flow components and their relationship to related income statement items

D. eview individual cash flow items for analytic significance

E. xamine the firm's ability to realize assets and settle liabilities

View answer

Correct Answer: E

Question #7

Information is ________ until it has been disseminated to the marketplace in general and investors have had an opportunity to react to the information.

A. one of these answers

B. alled

C. aterial

D. nside

E. onpublic

View answer

Correct Answer: E

Question #8

The supply curve for British pounds in the foreign exchange market:

A. s independent on the purchases of British goods by foreigners

B. one of these answers

C. s dependent on the purchases of foreign goods by the British

D. s dependent on the purchases of British goods by foreigners

View answer

Correct Answer: C

Question #9

A(n) ________ is someone who has knowledge of pending or actual investment recommendations or action.

A. overed person

B. one of these answers

C. IMR member

D. nsider

View answer

Correct Answer: A

Question #10

The following information is from the financial statements of Complex Capitalists for 1997 and 1998:Dec. 31, 1997 - 1 million common shares outstanding, capital structure all-equity March 31, 1998 - issued 200,000 common shares.May 31, 1998 - issued 800,000 warrants exercisable at a strike of 35. The average price during 1998 was 34 and the maximum price was 39. Given the above example, the Diluted EPS will use how many shares?

A.

B.

C.

D.

View answer

Correct Answer: D

Question #11

James Morrison is a profit-seeking banker. His bank has $25 million in excess reserves. Mr. Morrison

A. an probably increase his profits by increasing his excess reserves

B. annot affect his profits by changing the amount of excess reserves held by his bank

C. annot change excess reserves held by his bank because this level is set and strictly enforced by the Fed

D. an probably increase his profits by reducing his excess reserves

View answer

Correct Answer: D

Question #12

The coefficient of determination measures:

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

B. he degree of linear association between the dependent and the independent variables

C. he slope of the regression line

D. he amount of variance of the dependent variable explained by the independent variable

View answer

Correct Answer: D

Question #13

Which of the following is/are true about liquidity ratios, all else equal?

A. he cash ratio increases as average receivables increase

B. II only

C. I only

D. , II & III

E. & III

View answer

Correct Answer: B

Question #14

All possible samples of size n are selected from a population and the mean of each sample is determined.What is the mean of the sample mean?

A. annot be estimated in advance

B. one of these answers

C. xactly the same as the population mean

D. arger than the population mean

E. maller than the population mean

View answer

Correct Answer: C

Question #15

If the alternative hypothesis states that u(Mu) > 6,700, what is the rejection region for the hypothesis test?

A. enter

B. one of these answers

C. ower tails

D. pper tail

E. oth tails

View answer

Correct Answer: D

Question #16

In a period of falling prices, the FIFO inventory method

A. either of these answers is correct

B. oth of these answers are correct

C. agnifies the effects of the business cycle on income

D. ives the lowest possible value for ending inventory

View answer

Correct Answer: B

Question #17

Members pursuing the investment profession outside of the U.S. ________ the Code and Standards when local regulations are less stringent in order to maintain a level playing field.

A. ay disregard

B. an modify

C. hould ignore

D. ust adhere to

View answer

Correct Answer: D

Question #18

Which of the following is the proper method of reporting the value of financial instruments on a firm's balance sheet?

A. ll of these answers

B. igher of cost or market

C. one of these answers

D. ost

E. air market value

View answer

Correct Answer: D

Question #19

A survey of 144 retail stores revealed that a particular brand and model of a VCR retails for $375 with a standard deviation of $20. What is the 99% confidence interval to estimate the true cost of the VCR?

A. 328

B. 323

C. 335

D. 335

E. one of these answers

View answer

Correct Answer: B

Question #20

A common-size balance sheet consists of which of the following?

A. xpressing all items on the balance sheet as a percentage of total capital

B. xpressing all items on the balance sheet as a percentage of total sales

C. xpressing all items on the balance sheet as a percentage of total assets

D. one of these answers

E. xpressing all items on the balance sheet as a percentage of total liabilities

View answer

Correct Answer: C

Question #21

Nina Foch, CFA, is considering investing in an exchange traded fund (ETF). However, she is unsure how the ETF compares to open-end and closed-end funds. Which of the following statements comparing ETFs with open-end and closed-end funds is least likely to be true?

A. TF shares can be sold short, while open-end fund shares cannot be shorted

B. he legal structure of an ETF is similar to a closed-end fund

C. TF shares trade like closed-end fund shares

View answer

Correct Answer: B

Question #22

The sampling method commonly employed when the population is scattered over a large geographic area is known as:

A. ystematic random sampling

B. imple random sampling

C. tratified random sampling

D. luster sampling

View answer

Correct Answer: D

Question #23

SIMULATIONBob Kramer, CFA, manages money for high net worth clients. Kramer creates an investment portfolio tailored to his clients' specific needs using mutual funds. Kramer is considering the following Emerging Market Fund and uses a live year time frame. Exhibit 1 details the Emerging Market Fund's fees and expenses.Exhibit 1 - Fees and expenses for Emerging Market FundKramer expects the Emerging Market Fund to earn 12% per year.Select the class of Emerging Market Fund shares that are most appropriate fo

A. lass A

B. lass B

C. lass C

View answer

Correct Answer: C

Question #24

An economic researcher estimates the following regression between the annual income, I, of a family and the amount it spends on consumption goods, C:C = 2,000 + 0.65 I + error termIf the R-square of the regression is just 0.3, estimate the amount that a family with an income of 50,000 will spend on consumption.

A. 4,500

B. one of these answers

C. 2,500

D. ,000

View answer

Correct Answer: A

Question #25

Which of the following is an essential characteristic of a liability?

A. he identity of the recipient entity must be known to the obligated entity before the time of settlement

B. iabilities represent an obligation that has arisen as the result of a previous transaction

C. one of these answers

D. iabilities must be legally enforceable

E. iabilities must require the obligated enterprise to pay cash to a recipient entity

View answer

Correct Answer: B

Question #26

A 1-year U.S. Treasury bill is priced to yield 4.10%. A 2-year U.S. Treasury security is priced to yield 4.65%.The 1-year forward rate one year from now is closest to:

A.

B.

C.

View answer

Correct Answer: C

Question #27

In a given period, the firm's beginning gross investment is 4,000 and ending gross investment is 12,000. The accumulated depreciation at the beginning was 800 and the ending balance in this account was 900. The firm uses straight-line depreciation. The average age of the firm's assets at the end of the period is ________.

A. years

B. 3

C. years

D. 5 years

View answer

Correct Answer: C

Question #28

Douglas Morin is discussing market efficiency with some college students who are visiting his firm. Morin states that market efficiency would increase if the cost of trading decreases, if the cost of information decreases, and if arbitrageurs had less capital. Morin is least likely to be correct in his opinion about:

A. he cost of trading

B. he cost of information

C. rbitrageurs

View answer

Correct Answer: C

Question #29

If you buy an item and pay for it with 60 monthly payments of $75 that begin next month, what was the cash price today, if interest accrues at 11% per year, compounded monthly?

A. 4,598

B. 3,544

C. 2,545

D. 3,904

E. 3,449

View answer

Correct Answer: E

Question #30

According to Standard V (B), firms can claim compliance with the PPS only if their presentation is ________ in compliance with the Performance Presentation Standards in all material respects.

A. one of these answers

B. etroactively

C. ully

D. t least 50 percent

E. artially

View answer

Correct Answer: C

Question #31

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

A. one of these answers

B.

C.

D.

E.

View answer

Correct Answer: E

Question #32

Which of the following types of receivables is generally the most liquid?

A. rade receivables

B. eceivables due from affiliated companies

C. one of these answers

D. otes receivable

E. eceivables due from corporate officers

View answer

Correct Answer: A

Question #33

A firm currently has a financial leverage ratio of2. After a thorough review, the firm's management has concluded that they have to write-down assets worth 200,000. This will cause the firm's financial leverage to ________.

A. ecrease

B. nsufficient information given

C. ncrease

D. tay constant

View answer

Correct Answer: C

Question #34

The following asset is subject to the least amount of depreciation or amortization during its useful life:

A. and

B. arehouse

C. atents

D. omputer-based equipment

View answer

Correct Answer: A

Question #35

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

A. 0

B. 184

C. 217

D. 187

E. 174

View answer

Correct Answer: B

Question #36

Sixty percent of the customers of a fast food chain order the Whopper, fries and a drink. If a random sample of 15 cash register receipts is selected, what is the probability that 10 or more will show that the above three food items were ordered?

A.

B. one of these answers

C. ,000

D.

E.

View answer

Correct Answer: D

Question #37

A study of a company's practice regarding the payment of invoices revealed that on the average an invoice was paid 20 days after it was received. The standard deviation equaled five days. Assuming that the distribution is normal, what percent of the invoices were paid within 15 days of receipt?

A. 7

B. 6

C. 5

D. 4

E. one of these answers

View answer

Correct Answer: C

Question #38

An investment of $100 grows in five years to $205. The investor observes that the annual arithmetic rate of return and the geometric rate of return were the same over this period. The annual arithmetic rate of return must be ________.

A.

B. 5

C. 7

D. 3

E.

View answer

Correct Answer: B

Question #39

Keynesian analysis suggests that a planned budget surplus

A. ill affect aggregate demand only if the money supply decreases by the size of the surplus

B. s proper during periods of inflation but may increase unemployment if timed improperly

C. ill stimulate output and employment

D. ill stimulate both consumption and income

View answer

Correct Answer: B

Question #40

What is the Net Present Value of this series of annual cash flows at an interest rate of 10% per year: Year 0:<$25,000>, Year 1: $2,000, Year 2: $0, Year 3: $15,000, Year 4 $0, Year 5 $18,000? (Note that the <> are used to indicate a negative number).

A. $735

B. 314

C. $279

D. 42

E. $967

View answer

Correct Answer: A

Question #41

Which of the following is/are component(s) of Shareholder's equity?

A. referred equityII

B. I & III

C. only

D. , II & III

E. & III

View answer

Correct Answer: C

Question #42

Which of the following are operating cash flows?

A. nterest receivedII

B. , II, III & IV

C. , II & IV

D. & III

E. , II & III

View answer

Correct Answer: D

Question #43

How many deposits of $450 a month, beginning next month, are needed before an account has $200,000 in it, assuming it had a balance of $0 at the beginning and that interest is 6% per year, compounded monthly?

A. 66

B. 34

C. 19

D. o solution/Error

E. 44

View answer

Correct Answer: B

Question #44

You are faced with a counting problem in which you must choose k objects from n total objects. The order of choosing does not matter. The counting method you should use is:

A. one of these answers is correct

B. he binomial formula

C. he multinomial formula

D. he multiplication rule

View answer

Correct Answer: B

Question #45

When formulating an investment policy for a client, all of the following fall under "investor constraints," except ________.

A. xpected cash flows

B. ype and nature of clients

C. egulatory and legal circumstances

D. nvestor preferences, circumstances and unique needs

E. iquidity needs

View answer

Correct Answer: B

Question #46

The main purpose of the statement of financial position is to reflect

A. he market value of the firm's assets at some point in time

B. he status of the firm's assets in case of forced liquidation of the firm

C. tems of value, debts and net worth

D. one of these answers

E. he firm's potential for growth in stock values in the stock market

View answer

Correct Answer: C

Question #47

Which of the following is not true about monetary policy?

A. he money supply is neutral in the long-run

B. onetary policy can only serve to decrease economic volatility

C. n the long-run, the price level is a function of production and money supply

D. ithout interference, the money supply would remain constant

E. he money supply will have no impact on real income if changes in the price level are anticipated

View answer

Correct Answer: D

Question #48

A ________, which is between a bank and a customer (or another bank), specifies delivery at a fixed future date, of a fixed amount of one currency against dollar payment.

A. oreign exchange contract

B. orward contract

C. utures contract

D. urrency arbitrage

E. ross rate

View answer

Correct Answer: B

Question #49

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

A. 5%

B. 7%

C.

D. 2

View answer

Correct Answer: A

Question #50

Variables X and Y are perfectly negatively correlated. Given only this information, if you run a regression of Y against X, which of the following is/are true?

A. he intercept term is zero

B. only

C. II & IV

D. V only

E. & II

View answer

Correct Answer: E

Question #51

Which of the following best highlights a company's financial condition and overview of the results of operations?

A. he security and exchange commissions 401-k report

B. he auditor report

C. he statement of cash flows

D. one of these answers

E. anagement's discussion and analysis

View answer

Correct Answer: E

Question #52

How many monthly deposits of $50, beginning next month, will you need to make into an account that pays 6% per year, compounded monthly, before you will have $20,000?

A. 10

B. 01

C. 00

D. 20

E. 87

View answer

Correct Answer: D

Question #53

Which of the following best describes an balance sheet?

A. one of these answers

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

C. t reports investment activities for a specified accounting period

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

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

View answer

Correct Answer: D

Question #54

Bart Wiggum believes the current level of the S&P 500 index reflects all public information. To convince his supervisor of his hypothesis, Wiggum has downloaded a daily price series for the S&P 500 index for the period 1950 to 2007. Which of the following tests can be used to test Wiggum's belief about public information?

A. uns test

B. utocorrelation test

C. arnings surprise test

View answer

Correct Answer: C

Question #55

If a distribution is heavily right or left skewed, which of the following statistics should not be used as a measure of central tendency?

A. kewness

B. ean

C. edian

D. ode

View answer

Correct Answer: B

Question #56

When prices are rising, which of the following inventory valuation methods produces a lower ending inventory value?

A. IFO

B. verage cost

C. one of these answers

D. IFO

View answer

Correct Answer: A

Question #57

Which of the following expenses can be capitalized?

A. esearch costs incurred in developing a new medicine

B. I only

C. & II

D. II only

E. one of them

View answer

Correct Answer: A

Question #58

According to the AIMR-PPS, all actual fee-paying discretionary portfolios must be included in at least one composite defined according to

A. anagerial style of investment portfolio

B. imilar strategy or investment objective

C. ize of investment portfolio

D. ate of portfolio inception

View answer

Correct Answer: B

Question #59

If you deposit $7,000 into an account paying 6% per year, compounded annually, how much do you have in the account in 20 years?

A. 15,938

B. 23,403

C. 20,800

D. 22,470

E. 22,449

View answer

Correct Answer: E

Question #60

Within the Keynesian model, equilibrium output takes place ________.

A. hen actual and expected rates of inflation are equal

B. hen the nominal interest rate and real interest rate are equal

C. hen spending equals output

D. t full employment

View answer

Correct Answer: C

Question #61

A firm using LIFO accounting has a LIFO reserve of 4,700, with a FIFO ending inventory of 34,600. It is currently in the 40% tax bracket. If it switches to FIFO accounting for reporting purposes, it's deferred taxes ________.

A. ecrease by 2,820

B. ncrease by 2,820

C. ncrease by 1,880

D. ecrease by 1,880

View answer

Correct Answer: C

Question #62

According to the AIMR-PPS, plan sponsors, consultants and software vendors

A. re exempt from any of the Standards

B. re directly responsible for ensuring the companies they employ are in compliance with the Standards

C. re held accountable to the Standards in the same way as AIMR Members, Charterholders and Candidates

D. annot make a claim of compliance unless these entities actually manage the assets for which they are making the claim of compliance

View answer

Correct Answer: D

Question #63

Each of the following is true regarding Standard II (A), except:

A. ou may not state that you have completed Level I, II, or III until you have received the CFA designation

B. his standard relates to oral statements

C. ll of these answers

D. his standard relates to business cards and letterheads

E. ou must be registered for the next CFA exam in order to call yourself a candidate

View answer

Correct Answer: A

Question #64

During the past six months, the purchasing agent bought:Tons of Coal 1,200 3,000 500Price Per Ton $28.50 $87.25 $88.00What is the weighted mean price per ton?

A. 89

B. 68

C. one of these answers

D. 87

E. 72

View answer

Correct Answer: E

Question #65

The flow of money for the purpose of taking advantage of a covered interest differential is known as ________.

A. n outright swap

B. overed interest differential

C. he swap rate

D. overed interest arbitrage

E. nterest rate parity

View answer

Correct Answer: D

Question #66

Which of the following statements are correct?

A. company's choice of accounting principles for financial reporting purposes does not affect net cash flow for the accounting period

B. and III

C. , II and III

D. I and IV

E. and IV

View answer

Correct Answer: A

Question #67

Three equity analysts at Schiler & Company are debating their supervisor's claim that significant excess return can be generated by exploiting inefficiencies in the capital markets. Analyst A states, "... the large number of profit maximizing investors researching investment opportunities creates an efficient market." Analyst B rebuts by stating, "Over the past three years, my technical analysis strategy has outperformed all the major benchmarks, which proves the markets are not efficient." Analyst C states

A. nalyst

B. nalyst B

C. nalyst C

View answer

Correct Answer: A

Question #68

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

A. o not reject Ho

B. one of these answers

C. eject Ho

D. his cannot be answered

View answer

Correct Answer: C

Question #69

Wilma Green has been following the stock price movements of Bakery Supply International (BSI) and Hull Petrochemical Company (HPC). Green is convinced that the price of BSI stock is going to dramatically increase from its current price of $53.60 and that the price of HPC stock is going to dramatically decrease from its current price of $9.80. She has decided to use options to take advantage of the situation and has thus gatheredthe following data on three-month put and call options for the two stocks:If aft

A. hort BSI put with a $45

B. ong BSI put with a $45

C. hort BSI call with a $55

View answer

Correct Answer: C

Question #70

Each salesperson in a large department store chain is rated either below average, average, or above average with respect to sales ability. Each salesperson is also rated with respect to his or her potential for advancementeither fair, good, or excellent. These traits are the 500 salespeople were cross classified into the following table.Sales Ability Potential for AdvancementFair Good ExcellentBelow Average 161222Average 456045Above Average 9372135What is the probability that a sales person selected at rand

A.

B. one of these answers

C.

D.

E.

View answer

Correct Answer: E

Question #71

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 standard deviation of this group of stock market indices?

A. 0%

B. %

C. %

D. 6%

View answer

Correct Answer: B

Question #72

Social investments:

A. hould never be used in pension fund investing

B. n pensions must be well thought-out, making sure that such investments are legal and do not impair the integrity of the funds in questions or the financial security of the participants or beneficiaries

C. one of these answers

D. ave yet to be used as an investment in pension funds in the U

E. re proper investment vehicles for pensions, since they are a "public good

View answer

Correct Answer: B

Question #73

Which of the following would not normally be found in the footnotes that accompany financial statements?

A. ignificant legal proceedings

B. ist of officers and directors of company

C. etails of business acquisitions

D. ignificant accounting principles used

View answer

Correct Answer: B

Question #74

Standard IV (B) is known as ________.

A. reservation of Confidentiality

B. uty to Employer

C. rofessional Misconduct

D. rohibition against Use of Material Nonpublic Information

E. nteractions with Clients and Prospects

View answer

Correct Answer: E

Question #75

What is a disadvantage of the range as a measure of dispersion?

A. t is not in the same units as the original data

B. t can be distorted by a large mean

C. t is based on only two observations

D. one of these answers

E. t has no disadvantage

View answer

Correct Answer: C

Question #76

Which of the following appear(s) on the Income Statement?

A. nterest revenue

B. II only

C. , II & IV

D. I & IV

E. & III

View answer

Correct Answer: B

Question #77

When using transactional analysis, the following changes in the balance sheet account and the corresponding cash flow description would be correct except,

A. ong-term debt; increase or decrease in debt

B. ent payable; cash paid for inputs

C. ccounts payable; cash paid for inputs

D. hort-term debt; increase or decrease in debt

E. etained earnings; dividends paid

View answer

Correct Answer: B

Question #78

A firm using LIFO accounting has a LIFO reserve of 500, with a LIFO ending inventory of 2,300. It is currently in the 35% tax bracket. If it switches to FIFO accounting, its ending inventory would be reported at ________.

A. ,305

B. ,800

C. ,800

D. ,805

View answer

Correct Answer: B

Question #79

Mark Blazewhich, an analyst with an investment advisory firm, changed the recommendation on Zomega, Inc.'s stock from hold to sell 10 days ago. This recommendation was published in the firm's newsletter that came out two days after this announcement. Blazewhich has just given his broker instructions to liquidate Blazewhich's personal holdings of Zomega. Blazewhich has:

A. iolated Standard IV (B

B. iolated Standard IV (7) - Disclosure of Conflicts to Clients and Prospects

C. iolated Standard IV (B

D. ot violated any standard of AIMR code

View answer

Correct Answer: D

Question #80

Spassky was assigned the task of managing the portfolio of Fisher three days ago when Anand, who was managing Fisher's portfolio, retired. Fisher's portfolio consists of some deep-in-the-money put options, which will be exercised today, resulting in a cash flow of about $40,000. Spassky has not yet had a chance to meet Fisher in person to determine his needs, investment objectives and risk appetite. He did get a briefing from Anand about the portfolio and has a general idea about Fisher's investment attitud

A. eep the money in cash form and not risk it till he can meet Fisher to discuss the situation

B. roll over" the put positions for another week or two till he can meet Fisher and discuss the reinvestment of the funds

C. nvest the funds in a diversified portfolio with a risk profile similar to what Anand and Fisher have been maintaining over the past 3 months

D. nvest the funds in highly liquid, cash equivalent assets till he can meet Fisher and determine his needs, investment objectives and risk appetite

View answer

Correct Answer: D

Question #81

Depreciation expense for fixed assets is recorded

A. or each period the asset is in use

B. s a liability until the asset is sold

C. t the end of each fiscal period during the asset's useful life

D. hen the asset is sold

View answer

Correct Answer: C

Question #82

Bert wants to retire a millionaire. If he is 40 years old today and already has $40,000 in the bank, what monthly deposit 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. 703

B. 739

C. 738

D. 770

E. 742

View answer

Correct Answer: E

Question #83

Standard I of the Standards of Professional Conduct deals with ________.

A. one of these answers

B. undamental Responsibilities

C. iduciary Duties

D. riority of Transactions

E. lagiarism

View answer

Correct Answer: B

Question #84

The Statement of Stockholders' Equity does not report

A. ny minimum pension liability

B. ny cumulative impact on prior period earnings

C. he investment of the owners in the firm

D. he various accounting adjustments that reflect selected market value changes in noncurrent assets

E. he effect of exchange rate changes on certain foreign subsidiaries

View answer

Correct Answer: B

Question #85

What annual interest rate, compounded annually, is equivalent to 5% per year, compounded quarterly?

A.

B.

C.

D. %

E.

View answer

Correct Answer: A

Question #86

Performance Presentation Standards state that subsectors of larger international composites may be used to create stand-alone composites only if the subsectors are managed as ________ entities.

A. ndependent

B. wo

C. nique

D. eparate

View answer

Correct Answer: D

Question #87

According to the AIMR-Performance Presentation Standards, ________ must be used when calculating investment performance.

A. enchmark

B. sset-weighted return

C. ggregate return

D. otal return

View answer

Correct Answer: D

Question #88

What is the relationship between the variance and the standard deviation?

A. ariance is the square root of the standard deviation

B. one of these answers

C. o constant relationship between the variance and the standard deviation

D. ariance is twice the standard deviation

E. ariance is the square of the standard deviation

View answer

Correct Answer: E

Question #89

The inevitable consequence of price controls is:

A. ncreased currency convertibility

B. one of these answers

C. he development of black markets

D. rade war

View answer

Correct Answer: C

Question #90

What deposit would you need to make today in order to withdraw $100 a month for the next 5 years, beginning next month, if the deposit will accrue interest at 8% per year, compounded monthly?

A. 5,141

B. 492

C. 1,237

D. 399

E. 4,931

View answer

Correct Answer: E

Question #91

Van Jeffery, CFA, utilizes price multiples to evaluate the attractiveness of potential investment opportunities. However, Jeffery's supervisor does not support using price multiples exclusively in making investment decisions. The supervisor points out the following:Statement 1:P/S ratios are not able to capture the different cost structures of companies-Statement 2: The P/ CF ratio is more stable than the P/E ratio.Statement 3:An advantage of the P/B ratio (unlike the P/E ratio) is that the P/B ratio cannot

A. tatement 1

B. tatement 2

C. tatement 3

View answer

Correct Answer: C

Question #92

Which of the following best describes the distinction between expenses and losses?

A. osses result from peripheral or incidental transactions, whereas expenses result from ongoing major or central operations of the entity

B. osses are extraordinary charges, whereas expenses are ordinary charges

C. osses are reported net of related tax effect, whereas expenses are not reported net of tax

D. osses are material items, whereas expenses are immaterial items

E. one of these answers

View answer

Correct Answer: A

Question #93

Silverio Arvantis is an aggressive and quick-silver analyst with Foresi Associates, an investment advisory firm. Silverio, a freshly minted Ph.D. from the University of Chicago, recently formulated an algorithm for selecting the portfolio weights in relatively new high-tech stocks. The algorithm evaluates 43 different variables to choose the investments and as such, is fairly complex in nature. Not wishing to drown his clients in esoteric terms like "martingale" and "stochastic transformation," Silverio wri

A. iolated Standard V (B) - Performance Presentation by relying on past data

B. ot violated any standards

C. iolated Standard IV (A

D. iolated Standard IV (A

View answer

Correct Answer: C

Question #94

Mileage tests were conducted on a randomly selected sample of 100 newly developed automobile tires. The average tread wear was found to be 50,000 miles with a standard deviation of 3,500 miles. What is the best estimate of the average tread life in miles for the entire population of these tires?

A. one of these answers

B. 3,500/100)

C. ,500

D. 0,000

E. 50,000/100)

View answer

Correct Answer: D

Question #95

When reporting contingencies

A. isclosure of a loss contingency is to be made if there is a remote possibility that the loss has been incurred

B. uarantees of others' indebtedness are reported as a loss contingency only if the loss is considered imminent or highly probable

C. isclosure of a loss contingency must include a dollar estimate of the loss

D. one of these answers

E. loss that is probable but not estimable must be disclosed with a notation that the amount of the loss cannot be estimated

View answer

Correct Answer: E

Question #96

According to the method for calculating short-term interest rates from annualized rates, a three-month interest rate of 4% means that the interest rate paid after three months will be ________.

A.

B. %

C. %

D. %

E. one of these answers

View answer

Correct Answer: B

Question #97

A study of the opinion of designers with respect to the primary color most desirable for us in executive offices showed that:Primary Color Number of OpinionsRed 92Orange 86Yellow 46Green 91Blue 37Indigo 46Violet 2What is the probability that a designer does not prefer red?

A.

B.

C.

D.

E. one of these answers

View answer

Correct Answer: C

Question #98

What does FASB refer to?

A. he Financial Analysts Standards Board

B. he Federal Accounting Society Board of Directors

C. he Financial Accounting Standards Board

D. one of these answers

View answer

Correct Answer: C

Question #99

John buys a house that costs $275,000 and agrees to pay for it with a 15 year mortgage at 6% per year, compounded monthly. What is John's monthly payment on the loan?

A. 2,250

B. 2,320

C. 1,552

D. 1,972

E. 2,218

View answer

Correct Answer: B

Question #100

Which of the following is/are true in an inflationary environment?

A. or income statement purposes, LIFO is preferable to FIFO

B. I, III & IV

C. I & IV

D. II only

E. , III & IV

View answer

Correct Answer: D

Question #101

What annual interest rate, compounded annually, is equivalent to 8% per year, compounded semiannually?

A.

B.

C.

D.

E. %

View answer

Correct Answer: B

Question #102

Christine Crumbwell and Dorothy Drummond are two portfolio managers with Neptune Funds. Cristine is managing the personal trust fund of Paul Roker, who created the fund as an income support for his wife and a legacy for his two sons after his wife's death. Dorothy is in charge of a fund created by Katey Koric. Katey had started this fund as a long-term investment but recently decided to shift the asset mix toward municipal and high-income bonds. Her friend pointed out a great investment opportunity in the n

A. orothy has violated Standard IV (B

B. , II and III

C. and II only

D. only

E. I only

View answer

Correct Answer: D

Question #103

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

A. tandard II

B. tandard IV

C. one of these answers

D. tandard I

E. tandard V

View answer

Correct Answer: A

Question #104

Which of the following would not be considered an intangible asset?

A. ustomer lists

B. ll of these answers represent intangible assets

C. ineral rights

D. atents, copyrights, and trademarks

E. oodwill

View answer

Correct Answer: C

Question #105

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

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

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

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

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

View answer

Correct Answer: D

Question #106

Birch Ltd. had net income for the year of $101,504 and a simple capital structure consisting of the following common shares outstanding:Months Outstanding Number of SharesJanuary - February 24,000March - June 29,400July - November 36,000December 35,040Birch's earnings per share (rounded to the nearest cent) were ________.

A. 2

B. 3

C. 4

D. 3

E. 3

View answer

Correct Answer: D

Question #107

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

A. 39,000

B. 45,000

C. 46,000

D. 49,000

View answer

Correct Answer: A

Question #108

Parts of the standards that are ________ must be observed.

A. ecommended

B. uggested

C. andatory

D. estraining

E. nhibiting

View answer

Correct Answer: C

Question #109

Companies report accounts receivable at:

A. heir net realizable value

B. heir liquidation value

C. he lower-of-cost-or-market value

D. heir fair market value

View answer

Correct Answer: A

Question #110

A variable, W, is normally distributed with a mean of 12. 68% of its observations lie between 8 and 16. The coefficient of variation of W is ________.

A.

B.

C.

D.

View answer

Correct Answer: D

Question #111

The government currently has no debt. To alleviate an economic slow down, Congress proposes an increase in spending partially offset by an increase in the highest marginal tax rate. This will force the Treasury to issue new debt. According to which of the following economic theories would this stimulate the economy?

A. iscal policyII

B. one of these answers is correct

C. only

D. , II, III

E. I only

View answer

Correct Answer: B

Question #112

A firm using LIFO accounting has a LIFO reserve of 900, with a LIFO ending inventory of 8,100. It is currently in the 40% tax bracket. If it switches to FIFO accounting, which of the following is true?

A. ts ending FIFO inventory equals 7,200II

B. II only

C. & III

D. I & III

E. , II & III

View answer

Correct Answer: A

Question #113

Which of the following is not subject to depreciation?

A. utomobiles

B. achinery

C. and

D. and improvements

View answer

Correct Answer: C

Question #114

The portion of the supplies inventory that has been consumed during the fiscal period is classified as

A. n expense

B. n increase in retained earnings

C. liability

D. n asset

View answer

Correct Answer: A

Question #115

What is the area under the normal curve between z = 1.0 and z = 2.0?

A.

B.

C. one of these answers

D.

E.

View answer

Correct Answer: B

Question #116

Use the table below to choose the correct answer.Time Period Actual Inflation14 percent24 percent36 percent48 percentAccording to the adaptive expectations hypothesis, at the beginning of period 3, decision makers would expect inflation during period 3 to be ________.

A. percent

B. percent

C. percent

D. percent

View answer

Correct Answer: D

Question #117

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

A. IMR

B. lients

C. he Profession

D. mployers

E. one of these answers

View answer

Correct Answer: C

Question #118

Which of the following measures of dispersion are based on deviations from the mean?

A. one of these answers

B. tandard deviation

C. ean deviation

D. ll of these answers

E. ariance

View answer

Correct Answer: D

Question #119

Which of the following statements regarding hypothesis testing is false?

A. f the population standard deviation is known, then the standard deviation of the sample is found by dividing the population standard deviation by the square root of "n

B. he test statistic is also known as the "critical value

C. Type II error is defined as the act of incorrectly failing to reject the null hypothesis

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

E. espite the different ways to formulate a hypothesis, the null hypothesis is always tested at the point of equality

View answer

Correct Answer: B

Question #120

Standard II (C) deals with ________.

A. one of these answers

B. bligation to Inform Employer of Code and Standards

C. isclosure of Conflicts to Employer

D. uty to Employer

E. undamental Responsibilities

View answer

Correct Answer: F

Question #121

According to the Prudent Investor Rule, the trustee must:- adhere to ________, impartiality and prudence- maintain overall portfolio risk at a reasonable level- provide for reasonable diversification 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. upervisors

B. oyalty

C. one of these answers

D. ommitment

E. iversification

View answer

Correct Answer: B

Question #122

BeigeBox, a computer manufacturer, can construct computer systems with any one of 4 processors, 2 memory configurations, 3 hard drives, 2 monitors, 2 keyboards, and 2 CD drives. How many unique configurations of computer systems can BeigeBox construct?

A. 92

B. 6

C. 84

D. 4

View answer

Correct Answer: A

Question #123

How should holdings of equity securities of less than a 20% interest generally be classified on a firm's balance sheet?

A. s either trading or available-for-sale securities

B. sing the equity method

C. ll of these answers

D. s controlling interest securities

E. one of these answers

View answer

Correct Answer: A

Question #124

Denver Savin, CFA, is an analyst for an investment boutique. Savin is considering investing in one of the following two companies. Savin's evaluation is based on his estimation of price to cash flow. Bell United is a producer of aluminum. The company earned record profits in the latest year. Delmar is a major supplier to the worldwide auto industry. U.S. auto industry problems have reduced Delmar's earnings in the latest year.Based on the price to cash flow multiple, state whether Delmar or Bell United is m

A. elmar is more attractive

B. ell United is more attractive

C. elmar and Bell United are equally attractive

View answer

Correct Answer: A

Question #125

Which of the following is considered a characteristic of a liability?

A. liability represents a claim against a company's present and future assets and resources

B. liability requires the rendering of future services

C. ll of these answers

D. liability requires the payment of money

E. liability represents a claim that is usually senior to the holders of equity securities

View answer

Correct Answer: C

Question #126

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

A. 3

B. 3

C. 3

D. one of these answers

E. 3

View answer

Correct Answer: A

Question #127

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

A. 9,000

B. 23,000

C. 15,000

D. 12,000

View answer

Correct Answer: A

Question #128

According to The Code of Ethics, members of AIMR shall: "Use reasonable care and exercise ________."

A. ach and every day

B. one of these answers

C. ndependent professional judgment

D. ptimal diversification

E. pen communications with clients

View answer

Correct Answer: C

Question #129

Which of the following are considered when applying generally accepted accounting principles.

A. hen income is recognized as earned

B. hen expenses and losses accrue

C. ow assets are measured

D. ll of these answers are correct

E. hen liabilities are incurred

View answer

Correct Answer: D

Question #130

The following financial data on CashCow, Inc. have been taken from its financial statements for 1996:

A. ividends paid$25,000

B. ale of land$64,000

C. nventory purchases$29,000

D. urchase of a warehouse$208,000

E. onds issued$90,000

View answer

Correct Answer: D

Question #131

The inflation rate in an economy currently in equilibrium jumps up unexpectedly. According to the Adaptive Expectations hypothesis, unemployment will in the short run.

A. ll of these answers can happen

B. ecrease

C. ncrease

D. emain unaffected

View answer

Correct Answer: B

Question #132

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 rate35%Dividends paid 3,445Preferred Dividends 897Average total equity 37,432Average common equity 26,782Average total liabilities1 8,583In the above example, the firm's operating profit margin equals ________.

A.

B.

C.

D.

View answer

Correct Answer: A

Question #133

Which of the following will result in an insider trading prosecution?

A. tippee trades based on inside information, not knowing that the source of the information has actually received the information illegally and has breached fiduciary duty to the shareholders by leaking it

B. only

C. II only

D. , II and III

E. I and III only

View answer

Correct Answer: D

Question #134

Materiality is one of the pervasive concepts in financial accounting. Which of the following statements is true with regard to materiality?

A. elevant items are very material

B. ateriality judgments generally may be made without consideration of the magnitude of the item involved

C. one of these answers

D. he nature and magnitude of an item as well as the circumstances in which the judgment has to be made are integral aspects of a materiality judgment

E. ateriality judgments generally may be based solely on the magnitude of the item

View answer

Correct Answer: D

Question #135

Which of the following about Free Cash Flows (FCFs) is TRUE?

A. CF = Cash from operations - outlays for replacement of used capacity

B. CF = Cash from operations - outlays for maintenance of current capacity - dividends declared

C. CF = Cash from operations - outlays for dividend payments and scheduled debt retirement

D. CF = Net Income + Non-cash expenses

View answer

Correct Answer: B

Question #136

How many years will it take money to double at 7.25% per year, compounded annually?

A.

B. 2

C.

D.

E.

View answer

Correct Answer: E

Question #137

The weekly mean income of a group of executives is $1,000 and the standard deviation of this group is $100. The distribution is normal. What percent of the executive have an income of $925 or less?

A. bout 23%

B. bout 15%

C. bout 85%

D. bout 50%

E. one of these answers

View answer

Correct Answer: A

Question #138

Portfolios that include more than one asset class are called ________ portfolios.

A. uasi-asset

B. ultivariate

C. ultiple leverage

D. nivariate-asset

E. ultiple-asset

View answer

Correct Answer: E

Question #139

How many annual deposits of $1,500, beginning next year, would you need to make before you had accumulated $30,000, if the money earns 9% per year, compounded annually? Assume the account begins with a $0 balance.

A. 4

B. 0

C. 1

D. 5

E.

View answer

Correct Answer: C

Question #140

The coefficient of variation is useful when:

A. he frequency distribution contains open-ended classes or overlapping classes

B. only

C. & II

D. II only

E. I only

View answer

Correct Answer: D

Question #141

How much would you have in a savings account 12 months from now if you start with a balance of $1,000 today, make a deposit of $2,000 in 6 months and make another deposit 6 months after that of $3,000? Assume that interest accrues at 6% per year, compounded monthly.

A. 6,000

B. 5,500

C. 6,122

D. 7,684

E. 5,777

View answer

Correct Answer: C

Question #142

Debbie Chon, CFA, is evaluating a put option on Lincoln Industrial. Lincoln's current stock price is $64 per share and the company will pay a $0.56 dividend. The 90-day U.S. Treasury bill is yielding 5.3%. Lincoln's 3- month European call option with a strike price of $70 has a premium of $3.50. Based on the put-call parity, calculate the value of the associated Lincoln put option.

A. 8

B. 8

C. 9

View answer

Correct Answer: C

Question #143

How long will it take for an initial deposit of $2,500 to grow to be $4,000, if the interest rate is 5% per year, compounded annually?

A. 2 years

B.

C.

D.

E. 4

View answer

Correct Answer: B

Question #144

The primary purpose of the statement of cash flows is to

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

B. easure the change in the company's assets

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

D. nalyze net income during the accounting period

View answer

Correct Answer: C

Question #145

The mean of a normally distributed group of weekly incomes of a large group of executive is $1,000 and the standard deviation is $100. What is the z-score for an income of $1,100?

A. 0

B.

C. one of these answers

D.

E.

View answer

Correct Answer: E

Question #146

Which of the following would be an example of non-activist monetary policy?

A. he Central Bank attempts to counter-act negative developments in the economy

B. nflation is the only target for the Central Bank

C. he Central Bank tries to keep the money supply constant

D. he government keeps spending constant and allows tax revenues to rise or fall to compensate for changes in aggregate income

E. he Central Bank increases the money supply by 5% every year

View answer

Correct Answer: E

Question #147

Ann Fowler, CFA, has a client that wants to invest in hedge funds. Fowler recommends the client invest in a Fund of Funds (FOF), which will invest in a variety of hedge funds. Fowler makes the following statements:Statement 1:Investing in several different types of hedge funds will reduce risk compared to investing in a single fund.Statement 2:An important part of the selection process is due diligence to resolve any transparency issues.Which statements are correct?

A. nly statement 1 is correct

B. nly statement 2 is correct

C. oth statements 1 and 2 are correct

View answer

Correct Answer: A

Question #148

Standard III (C) deals with ________.

A. one of these answers

B. lagiarism

C. bligation to Inform Employer of Code and Standards

D. se of Professional Designation

E. isclosure of Conflicts to Employer

View answer

Correct Answer: E

Question #149

Assume that there is a widely accepted belief in the U.S. that 1-year interest rates will remain stable at their current level of 3.25%. A yield curve derived from spot rates on U.S. Treasury securities shows the following data:Maturity Spot Rate1 year 3.25%2 years 4.00%5 years 6.80%10 years 7.20%The yield curve based on this data is least consistent with which theory of the term structure of interest rates?

A. ure expectations

B. iquidity preference

C. arket segmentation

View answer

Correct Answer: A

Question #150

Which of the following AIMR Standards states that the financial analyst shall indicate the basic characteristics of the investment involved when preparing a research report not directly related to a specific portfolio or client?

A. II D

B. II C

C. one of these answers

D. V (A

View answer

Correct Answer: D

Question #151

If we reject the null hypothesis what can we conclude subject to the alpha risk?

A. lternative hypothesis is false

B. ull hypothesis is false

C. ull hypothesis is true

D. oth the null hypothesis and the alternative hypothesis are false

E. oth the null hypothesis and the alternative hypothesis are true

View answer

Correct Answer: B

Question #152

Irwin Inc. has a self-insurance plan. Each year, retained earnings is appropriated for contingencies in an amount equal to insurance premiums saved minus recognized losses from lawsuits and other claims. As a result of a 1996 accident, Irwin is a defendant in a lawsuit in which it will probably have to pay damages of $190,000. What are the effects of this lawsuit's probable outcome on Irwin's 1996 financial statements?

A. n increase in expenses and no effect on liabilities

B. o effect on expenses and an increase in liabilities

C. n increase in both expenses and liabilities

D. one of these answers

E. o effect on either expenses nor liabilities

View answer

Correct Answer: C

Question #153

What are half of the observations always greater than?

A. edian

B. eometric mean

C. one of these answers

D. ode

E. ean

View answer

Correct Answer: A

Question #154

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

A. n increase in real interest rates abroad

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

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

D. decrease in domestic real interest rates

View answer

Correct Answer: B

Question #155

The financial analyst is allowed to breach client confidentiality if the information concerns ________ activities that the client is engaged in.

A. ersonal

B. onfidential

C. nsider

D. one of these answers

E. llegal

View answer

Correct Answer: E

Question #156

A researcher has a sample of 900 observations from a population whose standard deviation is known to be 3,381. The mean of the sample is calculated to be 465.2. The null hypothesis is stated as Ho: mean < 200. The p-value in this case equals ________.

A.

B.

C.

D.

View answer

Correct Answer: D

Question #157

Which of the following statements is least likely to be a unique risk associated with a hedge fund?

A. ash needs arising from marking positions to market

B. nexpected absence of normal liquidity under extreme market conditions

C. igher volatility of returns as compared to traditional equity funds

View answer

Correct Answer: C

Question #158

Prepaid expenses are:

A. lassified as current liabilities on the balance sheet

B. dvance payments for goods not yet received which extend beyond the current accounting period

C. ot included in the calculation of a company's working capital

D. dvance payments for work that the company has not yet performed

View answer

Correct Answer: B

Question #159

Ned Jameson. CFA, is considering the purchase of a newly issued asset-backed security (ABS) for his fixed income portfolio. According to the broker/dealer offering the bond, the OAS for the issue is 75 basis points (bps). Based on the OAS value, which of the following assumptions can Jameson make about this particular ABS?

A. he OAS represents the investor's compensation for credit risk, liquidity risk, and option risk

B. he bond is trading at a yield that is more than 75 bps higher than a Treasury security with a comparable maturity

C. he implied cost of an option embedded in the security is always equal to the difference between the OAS and the Treasury spread

View answer

Correct Answer: B

Question #160

Disclosure of information about the extent, nature, and terms of financial instruments with off-balance- sheet credit or market risk and about concentrations of credit risk is required for all financial instruments. Which of the following is defined as a financial instrument?

A. erchandise inventory

B. note payable in U

C. one of these answers

D. eferred subscriptions revenue

E. warranty payable

View answer

Correct Answer: B

Question #161

If the Fed starts following a contractionary monetary policy:

A. he U

B. , II & III

C. & III

D. I only

E. I & III

View answer

Correct Answer: B

Question #162

A firm's financial statements reveal the following data:operating profit margin 41%interest expense ratio 4.2%debt-to-equity ratio 0.45total asset turnover 1.6tax rate 45%The firm's ROE equals ________.

A. 8

B. 8

C. 9

D. 3

View answer

Correct Answer: B

Question #163

You are examining a portfolio composed of 33% money-market investments, 9.5% bonds, and 57.5% stocks. Last year, the return on the money-market investments was 4%; the return on bonds was 9%, and the return on stocks was -11%. What is the portfolio weighted average return?

A. 4

B. 4

C. one of these answers is correct

D. 3

View answer

Correct Answer: B

Question #164

The coefficient of variation of a distribution X is twice that of Y. If X and Y have the same means, the variance of Y is:

A. alf that of X

B. wice that of X

C. one of these answers

D. ame as that of X

View answer

Correct Answer: C

Question #165

Which of the following are true regarding covariance?

A. ovariance of returns on two assets is 0 when the returns are unrelated

B. ll but II

C. ll but I

D. ll but IV

E. ll but III

View answer

Correct Answer: A

Question #166

Contingent losses are generally recognized when they are ________.

A. easurable

B. robable and measurable

C. easurable and realized

D. robable

View answer

Correct Answer: B

Question #167

Within the Keynesian model, if an economy operates below full employment,

A. educing wage rates and resource prices will quickly restore full-employment equilibrium

B. educing government expenditures will direct the economy back to full- employment equilibrium

C. n increase in the real interest rate will soon restore full-employment equilibrium

D. utput will tend to remain below full-employment capacity unless aggregate expenditures increase

E. educing the real interest rate will soon restore full-employment equilibrium

View answer

Correct Answer: D

Question #168

When an auditor finds that the audit is insufficient in scope to render an opinion, he will issue ________.

A. n unqualified opinion

B. n adverse opinion

C. qualified opinion

D. disclaimer of opinion

View answer

Correct Answer: D

Question #169

The U.S. Department of Education reported that for the past seven years 4,033, 5,652, 6,407, 7,201, 8,719, 11,154, and 15,121 people received bachelor's degrees in computer and information sciences. What is the mean annual number receiving this degree?

A. one of these answers

B. bout 6,217

C. bout 8,327

D. bout 15,962

E. bout 12,240

View answer

Correct Answer: C

Question #170

A linear regression is ________ relationship.

A. causal

B. n acausal

C. functional

D. one of these answers

View answer

Correct Answer: C

Question #171

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

A. rohibition against Plagiarism

B. esponsibilities of Supervisors

C. one of these answers

D. riority of Transactions

E. undamental Responsibilities

View answer

Correct Answer: D

Question #172

The multiplier effect refers to the fact that an autonomous change in spending (aggregate demand) will

A. ause prices to rise by some multiple of the initial increase in spending

B. educe prices by some multiple of the increase in spending

C. ncrease the money supply

D. ncrease unemployment

E. ause nominal output to rise by some multiple of the initial increase in spending

View answer

Correct Answer: E

Question #173

The research analyst for a stock brokerage firm wants to compare the dispersion in the price-earnings ratios for a group of common stock with their return on investment. For the price-earnings ratios, the mean is 10.9 and the standard deviation is 1.8. The mean return on investment is 25 percent and the standard deviation is 5.2 percent. What is the relative dispersion for the price earnings ratios and return on investment?

A. one of these answers

B. atios 50

C. atios 132

D. atios 32

E. atios 16

View answer

Correct Answer: E

Question #174

Assume you buy a car for $18,000 today and agree to pay $250 a month, beginning next month, for 5 years with a final payment also due 5 years from today to pay off any remaining balance. How large will that final payment be, if interest accrues at 2.9% per year, compounded monthly?

A. 3,000

B. 4,683

C. 4,280

D. 9,690

E. 1,204

View answer

Correct Answer: B

Question #175

Cash outflows for payment of cash dividends is an example of:

A. ash flows from financing activities

B. ash flows from investing activities

C. ash flows from noncash investing and financing activities

D. ash flows from operating activities

View answer

Correct Answer: A

Question #176

Which of the following does not affect a firm's cash flows:

A. arranty expenses

B. ale of an "impaired" asset

C. urchase of a trademark financed by stock issuance

D. hange of depreciation method

View answer

Correct Answer: C

Question #177

An analyst has been researching a possible investment in collateralized debt obligations (CDOs). Identify the statement which is most likely correct.

A. he underlying securities for a CDO are typically issued only by U

B. CDO with corporate bonds as the underlying security is known as a collateralized loan obligation (CLO)

C. CDO is typically structured into tranches, similar to a collateralized mortgage obligation (CMO)

View answer

Correct Answer: C

Question #178

Scott works for a regional brokerage firm. He estimates that Walkton Industries will increase its dividend by $1.50 a share during the next year. He realized that this increase is contingent on pending legislation that would, if enacted, give Walkton a substantial tax break. The U.S. representative for Walkton's home district has told Scott that, although he is lobbying hard for the bill and prospects for passage look good, Congress's concern over the federal deficit could cause the tax bill to be voted dow

A. cott violated the Standards because he used material inside information

B. and II only

C. I only

D. only

E. II only

View answer

Correct Answer: B

Question #179

The results of the regressions using 200 observation on a variable Y against X are as follows:Coefficient Standard errorintercept 3.62.1slope-8.11.3R square = 49%The correlation coefficient between X and Y is ________.

A. 0

B. 0

C. 0

D. 8

View answer

Correct Answer: B

Question #180

The Statement of Stockholders' Equity does not report

A. ny minimum pension liability

B. he investment of the owners in the firm

C. he various accounting adjustments that reflect selected market value changes in noncurrent assets

D. ny cumulative impact on prior period earnings

E. he effect of exchange rate changes on certain foreign subsidiaries

View answer

Correct Answer: D

Question #181

Serena Zaltz is a portfolio manager at Katalina Investments, a small boutique in Connecticut. She currently manages 3 client accounts, one of which belongs to John Hersham. John recently told Serena that if his portfolio beat the S&P500 by 75 basis points over the next 3 months, he would give 10 basis points to her as a "superior performance reward." Serena told him this was unnecessary but John insisted that such an arrangement be made on a handshake. Serena subsequently spoke to her supervisor, Helena, ab

A. as violated Standard IV (3) - Independence and Objectivity

B. as violated Standard III (D) - Disclosure of Additional Compensation Arrangements

C. ot violated any code of conduct

D. as violated Standard IV (B

View answer

Correct Answer: B

Question #182

A stock has the following returns over 3 years: -5%, +15%, -4%. The annual geometric rate of return over the three years is ________.

A.

B.

C.

D.

E. 2

View answer

Correct Answer: B

Question #183

The method used by the U.S. Treasury to issue debt is best described as a(n):

A. egular cycle auction--multiple price

B. egular cycle auction--single price

C. d hoc auction system

View answer

Correct Answer: B

Question #184

A 95% confidence interval for a population parameter signifies which of the following?

A. 5% of similarly constructed intervals will contain the population parameter

B. II only

C. , II & III

D. only

E. I only

View answer

Correct Answer: E

Question #185

A liability can be recognized when

A. n obligation exists to make a future payment based on a past event

B. ll of these answers

C. nly when the amount is certain

D. ny time a future payment is due

View answer

Correct Answer: A

Question #186

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

A. t is a bimodal distribution

B. only

C. II only

D. V only

E. I only

View answer

Correct Answer: B

Question #187

Ron Logan, CFA, is a bond manager. He purchased $50 million in 6.0% coupon Southwest Manufacturing bonds at par three years ago. Today, the bonds are priced to yield 6.85%. The bonds mature in nine years. Identify the most accurate statement regarding the pricing and yield of these bonds.

A. he bonds are trading at a discount, and the yield to maturity (YTM) has increased since purchase

B. he bonds are trading at a premium, and the yield to maturity (YTM) has decreased since purchase

C. he bonds are trading at a discount and the yield to maturity (YTM) has decreased

View answer

Correct Answer: A

Question #188

Firm A currently shows assets worth 2,000 and equity of 1,500. During the year, it capitalized interest expense worth 200, of which 50 was depreciated/amortized. The firm faces a tax rate of 50%. If the firm had expensed the interest paid, which of the following would be true?

A. ts assets would be stated at 1,750

B. ts assets would be stated at 1,850

C. ts assets would be stated at 2,000

D. ts assets would be stated at 1,800

View answer

Correct Answer: B

Question #189

Standard III (C) is ________.

A. esponsibilities of Supervisors

B. one of these answers

C. uty to Employer

D. isclosure of Conflicts to Employer

E. isclosure of Additional Compensation Arrangements

View answer

Correct Answer: D

Question #190

Which of the following statements about debt retirement features is TRUE?

A. bond issue must be retired in its entirety when exercising a call feature

B. make-whole premium provision and call price are identical terms

C. bond can be retired early even if it is nonrefundable

View answer

Correct Answer: C

Question #191

Congress proposes to stimulate the economy by cutting taxes for middle income families but raising taxes for wealthier tax payers. The effect will be the same net taxes collected, but most tax payers would pay less in taxes. According to which of the following economic theories would this stimulate the economy?

A. iscal policyII

B. , III

C. one of these answers is correct

D. II only

E. , II, III

View answer

Correct Answer: B

Question #192

The following are the weekly amounts of welfare payments made by the federal government to a sample of six families: $139, $136, $130, $136, $147 and $136. What is the range?

A. 52

B. one of these answers

C. 14

D. 17

E. 0

View answer

Correct Answer: D

Question #193

What does it mean if r = -1.00?

A. igh values of one variable are associated with low values of the other variable

B. ependent variable can be perfectly predicted by the independent variable

C. ll of the variation in the dependent variable can be accounted for by the independent variable

D. oefficient of nondetermination equals zero

E. ll of these answers are correct

View answer

Correct Answer: E

Question #194

Another name for "access" person is ________.

A. one of these answers

B. upervisor

C. mbudsman

D. uardian

E. iduciary

View answer

Correct Answer: F

Question #195

Which of the following AIMR standards pertains to the responsibilities of supervisors?

A. V

B. I C

C.

D. one of these answers

View answer

Correct Answer: D

Question #196

A firm has convertible bonds, preferred equity, common equity and straight bonds in its capital structure. Its net income equals 7,800. The interest payments on straight debt equal 423 and that on convertible debt equals 680. The preferred equity holders received 220 in dividends. If the weighted number of shares for Diluted EPS equals 1,300 and the firm is in the 40% tax bracket, the Diluted EPS equals _________. Assume the convertibles are dilutive.

A.

B.

C.

D.

View answer

Correct Answer: B

Question #197

Charlice is a portfolio manager who manages (with the help of four analysts) the pension plan assets of Gordon Industries. Charlice received this account four years ago from Gordon Industries Vice President, Michael Burnbaum, who is also in charge of investment oversight. To whom does Charlice owe fiduciary duties?

A. ichael Burnbaum, in his capacity as Gordon Industries' Investment Officer

B. II only

C. and III only

D. only

E. I and III only

View answer

Correct Answer: A

Question #198

Carmina Aburana is a sales assistant to Drew Door, a sales manager at Hicost Brokerage. Hicost has a policy of requiring at least 20% margin on stocks that are deemed illiquid or extremely risky. For these purposes, it creates and updates a list of such stocks on a weekly basis. Yoddly Yoo, Inc. is an up and coming internet firm whose stock has been on this list for some time now. One of Carmina's "blue chip" clients, Amadeus, has been speculating on Yoddly's stock for the past two weeks, repeatedly going i

A. rew has violated Standard II (B) - Professional Misconduct

B. armina has not violated any AIMR code but Drew has violated Standard III (E) - Responsibilities of Supervisors

C. one of these answers, since the infraction was too minor and inconsequential

D. armina has violated Standard III (B) - Duty to Employer

View answer

Correct Answer: B

Question #199

If consumption equals 1,100 when disposable income is 1,200 and increases to 1,400 when disposable income goes to 1,600, what are the marginal propensities to consume and to save?

A. PC = 1/5; MPS = 4/5

B. PC = 2/3; MPS = 1/3

C. PC = 3/4; MPS = 1/4

D. PC = 1/3; MPS = 2/3

View answer

Correct Answer: C

Question #200

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

A.

B.

C. , 3, 5

D.

View answer

Correct Answer: A

Question #201

Donald McKay, CFA, is analyzing a client's fixed income portfolio. As of the end of the last quarter, the portfolio had a market value of $7,545,000 and a portfolio duration of 6.24. McKay is predicting that the yield for ali of the securities in the portfolio will decline by 25 basis points next quarter. Which of the following statements regarding the portfolio's performance next quarter is most accurate?

A. or the expected change in portfolio yield next quarter, the market value of the portfolio will change by approximately 6

B. f the yield curve has a 50 basis point downward parallel shift next quarter, the portfolio will increase in value by approximately $235,404

C. he portfolio's ending value after the expected decline in yields will be approximately $7,427,298

View answer

Correct Answer: B

Question #202

Which of the following is/ are true?

A. n increase in inventories has a positive impact on cash flows

B. II & IV

C. I & III

D. & II

E. , II, III & IV

View answer

Correct Answer: A

Question #203

Suppose a tire manufacturer wants to set a mileage guarantee on its new XB 70 tire. Life test revealed that the mean mileage is 47,900 and the standard deviation of the normally distributed distribution of mileage is 2,050 miles. The manufacturer wants to set the guaranteed mileage so that no more than 5 percent of the tires will have to be replaced. What guaranteed mileage should the manufacturer announce?

A. 2,960

B. 4,528

C. 9,621

D. 0,922

E. one of these answers

View answer

Correct Answer: B

Question #204

New Gestalt, Inc., a software firm had a net income of 1.7 million last year. It has 200,000 common shares and 300,000 convertible bonds with face value of 100 outstanding. The convertible bonds carry a coupon of 4% and can be converted one-for-one. The average stock price last year was 39 and the maximum price was 57. The effective interest rate on the convertible debt is 8%. New Gestalt issued 100,000 preferred shares with face value 100 and a coupon of 5% on March 31st of last year. Assume the convertibl

A.

B.

C.

D.

View answer

Correct Answer: C

Question #205

The basic asset-liability equation, assets = liabilities + shareholder equity implies:

A. perating activities = financing activities

B. nvesting activities = financing activities

C. nvesting activities = operating activities

D. one of these answers

View answer

Correct Answer: B

Question #206

What annual interest rate, compounded annually, would cause a series of 10 deposits of $1,000 to accumulate to $18,000, if the first deposit is made one year from today?

A. 4

B. 2

C. 2

D. 1

E. 5

View answer

Correct Answer: B

Question #207

In preparing its cash flow statement for the year ended December 31, 1998, Roman Co. collected the following data:Gain on sale of equipment $6,000Proceeds from sale of equipment 10,000Purchase of

A.

A. 20,000

B. 37,000

C. 75,000

D. 30,000

E. 27,000

View answer

Correct Answer: B

Question #208

NL is a country with no securities laws. LS is a country that has securities laws that are less strict than the AIMR code of ethics while MS has securities laws that are stricter than the code of ethics. Which of the following is/are true?

A. member who lives in NL must always follow the AIMR code

B. I and IV only

C. and IV only

D. , II, III and IV

E. I and III only

View answer

Correct Answer: B

Question #209

The Prudent Man Rule, as it was originally written, was clearly oriented towards ________.

A. haritable organizations

B. ublic pension plans

C. ndividual clients

D. ersonal trust accounts

E. ndowments

View answer

Correct Answer: D

Question #210

"Rapid growth in the money supply is the primary cause of inflation. The time period between acceleration in the growth rate of the money supply and an acceleration in inflation is often lengthy (for example, from 12 to 36 months) and difficult to predict." These two statements are

A. asic tenets of the Keynesian doctrine

B. ormative economic statements

C. asic tenets of the Monetarist doctrine

D. nternally inconsistent

View answer

Correct Answer: C

Question #211

A firm's gross profit margin equals 35.2% and the operating profit margin equals 26.7%. If its net sales equal 6,128, the firm's SGA expenses equal ________.

A. 48

B. 21

C. 96

D. 57

View answer

Correct Answer: B

Question #212

A cumulative frequency distribution on days absent during a calendar year by employees of a manufacturing company is shown below.Days Absent Cumulative Number of Employees0 - 2603 - 5316 - 8149 - 11612 - 142How many employees were never absent?

A. one of these answers

B. 9

C. annot be determined from the given data

D. 1

E. 0

View answer

Correct Answer: C

Question #213

To fulfill the duty to inform their employer that they must follow AIMR's Code and Standard, members must:

A. nform their immediate supervisor in writing

B. nform their immediate supervisor either orally or in writing

C. nform the firm's chief executive officer in writing

D. nform the firm's chief executive officer either orally or in writing

View answer

Correct Answer: A

Question #214

Why is book value per share important?

A. ecause it is frequently used in assessing merger terms

B. ll of these answers

C. t is the best method of determining the market value of a firm's common stock

D. one of these answers

E. ook value per share is the "true" value of a firm\'s common stock

View answer

Correct Answer: A

Question #215

Which of the following is/are true about the cash conversion cycle?

A. t increases as the inventory turnover ratio decreases

B. I, III & IV

C. & IV

D. I & III

E. & II

View answer

Correct Answer: D

Question #216

The relationship between inflation and unemployment rate is known as:

A. hillips curve

B. quation of exchange

C. ucas curve

D. nflation-unemployment parity

View answer

Correct Answer: A

Question #217

The amount by which a plant asset depreciated is classified as

A. liability

B. n asset

C. n expense

D. evenue

View answer

Correct Answer: C

Question #218

Which standard deals with the Prohibition against Use of Material Nonpublic Information?

A. II

B. II (4)

C. V (B

D. V (B

E. (A)

View answer

Correct Answer: E

Question #219

When preparing a statement of cash flow, one of the relationships between balance sheet changes and cash flows can be summarized as

A. ecreases in liabilities represent net cash inflows

B. ncreases in liabilities represent net cash outflows

C. ncreases in assets represent net cash outflows

D. ecreases in assets represent net cash outflows

View answer

Correct Answer: C

Question #220

Over a given year, a firm's total assets increased by $8,000 and total liabilities decreased by $6,000. If the firm did not issue any new equity and paid out $1,800 in dividends, then its net income during the year was ________.

A. 12,200

B. 200

C. 3,800

D. 15,800

View answer

Correct Answer: D

Question #221

When analyzing the balance sheet, which of the following is an argument against using LIFO in times of rising prices?

A. either of these answers is correct

B. oth of these answers are correct

C. nder LIFO, ending inventory will be overstated

D. nder LIFO, ending inventory is valued at the oldest prices, an unrealistic valuation

View answer

Correct Answer: D

Question #222

The marketing department of a nationally known cereal maker plans to conduct a national survey to find out whether or not consumers of flake cereals can distinguish one of their favorite flake cereals. To test the questionnaire and procedure to be used, eight persons were asked to cooperate in an experiment. Five very small bowls of flake cereals were placed in front of a person. The bowls were labeled A, B, C, D, and E. The person was informed that only one bowl contained his or her favorite flake cereal.

A.

B.

C.

D. one of these answers

E.

View answer

Correct Answer: A

Question #223

A histogram is best described as:

A. collection of frequency classes in which the raw data are arranged

B. bar chart of relative frequencies

C. scatter plot of the raw data on the X-Y plane

D. visual representation of a frequency distribution

View answer

Correct Answer: D

Question #224

If one or more numbers in a dataset are negative, which of the following is not always defined?

A. ean

B. edian

C. eometric mean

D. ode

View answer

Correct Answer: C

Question #225

Standard IV (B.8) deals with ________.

A. rohibition against Use of Material Nonpublic Information

B. reservation of Confidentiality

C. one of these answers

D. rohibition against Misrepresentation

E. isclosure of Referral Fees

View answer

Correct Answer: E

Question #226

Which of the following best qualifies as a "cash equivalent?"

A. firm\'s investment in "held to maturity" U

B. ll of these answers

C. firm's equity investment in an unconsolidated subsidiary of a privately held firm

D. firm's investment in U

E. one of these answers

View answer

Correct Answer: D

Question #227

An experiment may have:

A. wo or more results

B. one of these answers

C. nly two results

D. nly one result

View answer

Correct Answer: A

Question #228

A bell-shaped, symmetrical frequency distribution has a mean of 45. If 95% of the observations on the variable fall between 30 and 60, the standard deviation of the variable is:

A.

B.

C. nsufficient information

D. 5

View answer

Correct Answer: B

Question #229

Mark King, CFA, is valuing Nacho Inc., a food distributor. Nacho is currently selling for $28 per share and has a 3.0% dividend yield. The risk-free rate is 4%, and the expected return on the market is 8%. King has calculated Nacho's beta to be 1.25. Based on King's analysis, Nacho stock's intrinsic value is $30 per share. King should:

A. nvest in Nacho shares

B. ot invest in Nacho shares because the required rate of return is less than the expected rate of return

C. ot invest in Nacho shares because the required rate of return is greater than the expected rate of return

View answer

Correct Answer: A

Question #230

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

A. 31

B. 38

C. 53

View answer

Correct Answer: A

Question #231

Which of the following can be found in Standard V?

A. embers shall not participate in any professional conduct involving dishonesty, fraud, deceit, etc

B. embers shall deliver a copy of the Code to their employer

C. embers shall not misrepresent investment performance

D. embers shall exercise diligence and thoroughness in making investment recommendations or in taking investment actions

E. embers shall not knowingly participate or assist in any violation of laws, rules, or regulations

View answer

Correct Answer: C

Question #232

An analyst is considering a bond for purchase. The bond has a coupon that resets semiannually and is determined by the following formula:coupon = 12% - (3.0 * 6-month Treasury bill rate)Identify what type of bond this is, and calculate the coupon rate this bond would reset to if the 6-month Treasurybill rate is 4.5%.

A. his bond is an inverse floater, and the coupon would reset to 1

B. his bond is an inverse floater, and the coupon would reset to 0

C. his bond is a step up note, and the coupon would reset to 4

View answer

Correct Answer: B

Question #233

Which of the following is/are true about claims of compliance with the AIMR-PPS?

A. f a firm is only in partial compliance with PPS, it must use a disclaimer specifying the exact areas of non- compliance

B. , II and III

C. one of them

D. II only

E. and III only

View answer

Correct Answer: C

Question #234

A variable, Z, is regressed against variables X and Y and the following equation is estimated: Z = -3.0 + 1.2X - 2.5Y + error. If X = 5 and Y = 3, the estimated value of Z is ________.

A. 3

B. annot be estimated since the error term is unknown

C. 1

D. 4

View answer

Correct Answer: D

Question #235

Ratios are best interpreted when compared to which of the following?

A. redetermined standards

B. he ratios of prior periods

C. ll of these answers are correct

D. atios of competitors

View answer

Correct Answer: C

Question #236

Which of the following is/are true about Treasury stock?

A. hey represent registered shares that have been reacquired from shareholders

B. & II

C. , II & III

D. only

E. & III

View answer

Correct Answer: D

Question #237

Under a ________ income tax system, as income grows, the average personal income tax liability of individuals and families increases.

A. orporate

B. egressive

C. iscretionary

D. utomatic

E. rogressive

View answer

Correct Answer: E

Question #238

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

A. he plan manager owes a fiduciary duty to the plan sponsor

B. I and III only

C. I only

D. one of them

E. and II only

View answer

Correct Answer: C

Question #239

Firm A capitalized an expense and an otherwise identical Firm B expensed it. Then,

A. shows higher operating cash flow and investing cash flow

B. shows higher operating cash flow and lower investing cash flow

C. shows lower operating cash flow and investing cash flow

D. shows lower operating cash flow and higher investing cash flow

View answer

Correct Answer: B

Question #240

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

A. one of these answers

B.

C.

D.

E.

View answer

Correct Answer: E

Question #241

In a sample of 2,000 persons, 1,600 favored more strict environmental protection measures. What is the estimated population proportion?

A.

B.

C.

D. one of these answers

E.

View answer

Correct Answer: E

Question #242

In year 0, $10 could purchase a certain basket of goods. In year 20, the identical basket of goods cost $36. What was the average annualized inflation rate during this period?

A.

B.

C. 2

D. 0

E.

View answer

Correct Answer: E

Question #243

Milton Samuel, a quantitative analyst with Middle Road Brokerage, is examining a data sample and has amassed the following information:Standard deviation of the sample: 12.37Number of observations: 100Sample mean: 231Assume that Mr. Samuel formulates a null hypothesis stating that the population mean is equal to 212. Additionally, assume that the population standard deviation is unknown. Given this information, what is the standard error of the estimate? Further, what is the test statistic? Choose the best

A.

B.

C.

D.

E. one of these answers is correct

View answer

Correct Answer: G

Question #244

An end-of-period adjustment for depreciation of fixed assets involves an entry to an expense and

A. he increase of a contra account

B. he decrease of a contra account

C. he reduction of a liability

D. he increase of a liability

View answer

Correct Answer: A

Question #245

What annual interest rate, compounded annually, would cause a series of 20 deposits of $1,000 to accumulate to $40,000, if the first deposit is made one year from today?

A.

B.

C.

D.

E. 4

View answer

Correct Answer: A

Question #246

The following data have been obtained from a firm's financial statements:operating profit margin 34%interest expenses 465depreciation expenses 123debt-to-equity ratio 0.60total assets 2,375total sales 4,109tax rate 37%The firm's ROE equals ________.

A. 9

B. 2

C. 6

D. 4

View answer

Correct Answer: D

Question #247

If you deposit $10,000 into an account paying 6% per year, compounded semiannually, how much do you have in the account in 10 years?

A. 15,403

B. 18,061

C. 18,938

D. 21,667

E. 17,800

View answer

Correct Answer: B

Question #248

Which of the following is/are true under accrual accounting?

A. evenues are recognized when goods are delivered

B. I & IV

C. , III & IV

D. I & III

E. & IV

View answer

Correct Answer: D

Question #249

If a nation is running a "trade deficit," it is

A. pending more on public services than it is raising in tax revenues

B. xporting more goods and services than it imports

C. mporting more goods and services than it exports

D. ncountering a balance of payments disequilibrium

E. orse off as the result of its trade with foreign countries

View answer

Correct Answer: C

Question #250

The following information is provided about Jacko Industries.Using the method of average return on equity, Jacko's P/E ratio is closest to:

A. 0

B. 6

C. 0

View answer

Correct Answer: A

Question #251

What is the effective date for compliance with the AIMR-Performance Presentation Standards for non-U.S. and/ or non-Canadian investments and taxable portfolios?

A. anuary 1, 1994

B. anuary 1, 1993

C. anuary 1, 1992

D. anuary 1, 1995

View answer

Correct Answer: A

Question #252

Companies A and B, similar in all respects, recently bought identical securities. However, using the "Management intent" rule, A has classified the securities as "trading" securities while B has categorized them as "available-for-sale" securities. Which of the following statements is/are true as a result of this difference?

A. and B will show same assets on their balance sheets

B. I & III

C. II only

D. & III

E. , II & III

View answer

Correct Answer: D

Question #253

An investor takes a long position in a corn futures contract. Initial margin on the contract is 10% of the contract value and maintenance margin is half of the initial margin. If, at the beginning of the second trading day for the contract, the investor receives a margin call, it is least likely that:

A. ariation margin is greater than maintenance margin

B. he final trade from the previous day is greater than the contract price

C. he average of the last few trades from the previous day is less than the contract price

View answer

Correct Answer: B

Question #254

All of the following are components of Shareholder's equity EXCEPT ________.

A. ar value

B. ividends paid

C. etained earnings

D. apital contributed in excess

View answer

Correct Answer: B

Question #255

Each of the following are conditions that must be met if revenue is going to be recognized at the time of sale except

A. eller has no significant obligations for future performance to directly effect resale of product

B. roduct return periods are less than or equal to 30 days from the time of sale

C. rice is substantially fixed or determinable at the sale date

D. uyer pays the seller or is obligated to pay the seller (not contingent on resale)

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Correct Answer: B

Question #256

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

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

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

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

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

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

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Correct Answer: A

Question #257

When creating composites, ________ returns must not be mixed with asset-plus-cash returns.

A. odel

B. ortfolio

C. sset-only

D. ash

E. erformance

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Correct Answer: C

Question #258

________ establishes the fiduciary principles for U.S. corporate pension plans.

A. IMR

B. SPC

C. RISA

D. TO

E. MIFA

View answer

Correct Answer: C

Question #259

Which of the following is true?

A. uring a recession, cyclical unemployment will be low

B. rictional unemployment implies a lack of available jobs

C. hen an economy is at full employment, actual unemployment will be less than the natural unemployment

D. hen actual GDP equals potential GDP, the actual unemployment will equal the economy's natural unemployment

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Correct Answer: D

Question #260

In a situation where information is costly to acquire and individuals must spend time searching for jobs, which type of unemployment will result?

A. tructural

B. easonal

C. rictional

D. yclical

View answer

Correct Answer: C

Question #261

Which of the following is not a valid reason for selecting a sample instead of studying the whole population?

A. ll of these answers reasons are valid

B. ample results have more accuracy than population results

C. ost of studying an entire population can be too high

D. opulation can be destroyed in the process of studying it

E. tudy of the population can be too time consuming

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Correct Answer: B

Question #262

Lynn Smith, CFA, and a marketing associate have a disagreement over whether the stock market is truly efficient. The marketing associate believes that the stock market is totally efficient based on academic research that shows actively managed mutual funds do no better than a buy-and-hold strategy. Thus, he invests solely in index funds. Smith counters that academic research indicates that low P/E ratio stocks provide superior risk- adjusted returns. Based on this discussion, indicate which of the following

A. he strong form of the EMH is supported by academic research on low P/E stocks

B. he semistrong form of the EMH is not supported by academic research on low P/E stocks

C. he strong form of the EMH is not supported by academic research on mutual funds

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Correct Answer: B

Question #263

According to the AIMR-PPS, ________ accounting must be used for fixed-income and all other securities that accrue income.

A. ime-weighted

B. IFO

C. ccrual

D. ixed income

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Correct Answer: C

Question #264

A selected group of employees of Unique Buying Services is to be surveyed with respect to a new pension plan. In depth interviews are to be conducted with each employee selected in the sample. The employees are classified as follows.Classification Event Number of EmployeesSupervisors A 120Maintenance B 50Production C 1,460Management D 302Secretarial E 68What is the probability that the first person selected is in management AND in supervision?

A.

B. one of these answers

C.

D.

E.

View answer

Correct Answer: A

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