Prepare Confidently for the CFA Level II Exam with Practice Questions

Question #1

Which of the following would increase GDP?

A. ercedes-Benz begins to produce and sell cars in Alabama

B. n American investor buys 100 shares of Ford stock

C. ord Motor Company begins to produce and sell cars in Japan

D. n American investor purchases 100 shares of Mercedes-Benz stock

View answer

Correct Answer: A

Question #2

The significance level in hypothesis testing refers to the probability that we will:

A. eject the alternative when it is true

B. eject the null when it is true

C. ccept the alternative when it is true

D. ail to reject the null when it is false

View answer

Correct Answer: B

Question #3

What is the following table called?Ages Number of Ages20 - 291630 - 392540 - 495150 - 598060 - 692070 - 798

A. one of these answers

B. give

C. istogram

D. requency distribution

E. requency polygon

View answer

Correct Answer: D

Question #4

A researcher has a sample of 700 observations from a population whose standard deviation is known to be 1,235.6. The mean of the sample is calculated to be 219.2. The null hypothesis is stated as Ho: mean = 150 and the alternative is non-directional. The p-value in this case equals ________.

A. 0

B. 3

C.

D. 2

View answer

Correct Answer: B

Question #5

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

A.

B. 2

C. 4

D.

View answer

Correct Answer: B

Question #6

What is the annual Internal Rate of Return of this series of annual cash flows: Year 0: <$25,000>, Year 1:$5,000, Year 2: $0, Year 3: $30,000? (Note that the <> are used to indicate a negative number).

A.

B. 5

C. 4

D. 3

E. 2

View answer

Correct Answer: D

Question #7

What does the complement rule state?

A. (A) = 1 - P(not A)

B. one of these answers

C. (A) = P(A) - P(B)

D. (A) = P(A) x P(B)

E. (A) = P(A) + P(B)

View answer

Correct Answer: A

Question #8

Eileen Hart, CFA, is a fixed income portfolio manager for MTY Investment Management. Hart's portfolio includes US agency mortgage-backed securities. Which of the following statements about U.S. agency mortgage-backed securities is least accurate?

A. ash flows from mortgage loans include prepayments, which could affect the future performance of Hart's portfolio

B. ass-through securities issued by Ginnie Mae guarantee the timely payment of interest and principal

C. ollateralized mortgage obligations (CMO) redirect cash flows from the underlying mortgage pool to eliminate prepayment risk

View answer

Correct Answer: C

Question #9

Standard IV (B.2) deals with ________.

A. ompensation

B. air dealing

C. oft dollars

D. ompetition

E. one of these answers

View answer

Correct Answer: F

Question #10

An investor buys 200 shares of ABC at the market price of $100 on full margin. The initial margin requirement is 40 percent and the maintenance margin requirement is 25 percent.What is the leverage factor of the margin purchase?

A.

B.

C.

D.

View answer

Correct Answer: A

Question #11

An analyst develops the following information to value a common stock.The analyst estimates the required rate of return and uses a DDM to value the shares. The value per share is closest to:

A. 14

B. 21

C. 31

View answer

Correct Answer: A

Question #12

Latham has been following a publicly traded oil firm, Techron Oil. Recently, he read a review about the oil fields in Venezuela, to the effect that the actual oil content of the fields across the country might be as much as 35% higher than previously estimated. Techron owns sizable properties in Venezuela and Latham has concluded that the research report implies that Techron might have as much as a million gallons a day in excess capacity that has not been factored into the stock price. In his report, he pr

A. iolated Standard V (A) - Prohibition against Use of Material, Non-Public Information

B. I, III and IV only

C. II only

D. one of them

E. and III only

View answer

Correct Answer: B

Question #13

The balance sheet of firm A shows the following:Cash & Cash equivalents 386Receivables 119Inventories 204Marketable securities 143Short-term loans 649Current portion of long-term debt 312The cash ratio of the firm equals ________.

A.

B.

C.

D.

View answer

Correct Answer: A

Question #14

A normally distributed variable 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 approximately ________.

A.

B. 0

C. nsufficient information

D. 5

View answer

Correct Answer: A

Question #15

If the estimated life of a long-term asset is increased, which of the following is true?

A. he depreciation expense increasesII

B. & II

C. II & IV

D. & III

E. , III & IV

View answer

Correct Answer: B

Question #16

The significance level of a test is usually equal to which of the following:

A. he power of a test

B. he probability of a Type I error

C. one of these answers is correct

D. he probability of a Type II error

E. ore than one of these answers is correct

View answer

Correct Answer: B

Question #17

A firm has a high debt-to-equity ratio. In order to improve this ratio in earlier years, it will prefer:

A. IFO accounting and accelerated depreciation

B. IFO accounting and straight-line depreciation

C. IFO accounting and straight-line depreciation

D. IFO accounting and accelerated depreciation

View answer

Correct Answer: C

Question #18

Which of the following is / are true?

A. sample is a subset of the population

B. , II, III & IV

C. , III & IV

D. V only

E. only

View answer

Correct Answer: F

Question #19

A dataset of 105 observations is organized in a relative frequency distribution into 9 classes. The sum of the relative frequencies across all the classes equals ________.

A.

B.

C. 05

D. 00

View answer

Correct Answer: B

Question #20

A normal distribution has a mean of 39 and a variance of 625. The area under the distribution between 50 and 75 equals ________.

A.

B.

C.

D.

View answer

Correct Answer: D

Question #21

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

A. ross profit

B. IFO

C. IFO

D. eighted average

View answer

Correct Answer: B

Question #22

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

A. one of these answers

B. ost recent price

C. he average price

D. arliest price

View answer

Correct Answer: B

Question #23

The goal of an ideal inflation policy would be

A. ocusing on unemployment first

B. inimizing average inflation

C. eeping inflation stable

D. rowing the money supply at a constant rate

E. riving the price level higher

View answer

Correct Answer: C

Question #24

The following data have been extracted from the financial statements of a firm for two years, 1995 and 1996:1995 1996Assets 8,174 8,439Net Sales 9,412 8,949Receivables 1,135 986Inventory 2,119 2,464COGS 6,948 7,089The receivables turnover ratio and the average receivables collection period for 1996 equal ________.

A.

B.

C.

D. one of these answers

View answer

Correct Answer: A

Question #25

If the variance of a probability distribution was computed to be 3.6, what is the standard deviation?

A.

B.

C. one of these answers

D.

E. 2

View answer

Correct Answer: B

Question #26

International trade can benefit domestic firms because:

A. he market contracts and allows economies of scale in production

B. onsumers purchase more from local firms

C. one of these answers

D. ompetition is promoted in domestic markets and consumers can purchase a wide diversity of goods at economic prices

E. pportunity costs for all goods increase

View answer

Correct Answer: D

Question #27

Mr. Taylor states in his will that his $50,000 portfolio of bank CD's will go to his only son. Upon Mr. Taylor's death, the son sells the CD's and invests the proceeds in a stock mutual fund. How does this immediately impact M2 and the effective amount money available for transactions?

A. oth decrease

B. ecrease, increase

C. o change, decrease

D. oth increase

E. o change for either

View answer

Correct Answer: F

Question #28

Under the treasury stock method, primary earnings per share data are computed as if options and warrants (outstanding for the entire year) were exercised at the

A. one of these answers

B. eginning of the period and as if the funds obtained thereby were used to purchase common stock at the current market price in effect at the end of the period

C. nd of the period and as if the funds obtained thereby were used to purchase common stock at the current market price in effect at the end of the period

D. nd of the period and as if the funds obtained thereby were used to purchase common stock at the average market price during the period

E. eginning of the period and as if the funds obtained thereby were used to purchase common stock at the average market price during the period

View answer

Correct Answer: E

Question #29

How will an unanticipated increase in aggregate demand emanating from an increase in business and consumer optimism influence equilibrium output in the goods and services market?

A. utput will decrease and prices rise

B. utput will decrease and prices fall

C. utput will increase and prices rise

D. utput will increase and prices decline

View answer

Correct Answer: C

Question #30

An employee's pension payments are based on his salary and length of service. He does not bear the risk of the pension size being affected by market performance. He is enrolled in the:

A. efined benefits plan

B. efined contribution plan

C. efined pension plan

D. mployee pension benefits plan

View answer

Correct Answer: A

Question #31

A piece of equipment costs $200,000, has a useful life of 5 years and an estimated salvage value of $50,000. How much depreciation expense should the company recognize in year 4 if it is using the sum-of-the- years' digits method of depreciation?

A. 30,000

B. 80,000

C. 26,666

D. 20,000

View answer

Correct Answer: D

Question #32

The sum of the squares of 1,200 observations equals 9,830. The sum of the observations equals 1,510. The population standard deviation of the observations equals ________.

A.

B.

C.

D.

View answer

Correct Answer: B

Question #33

What monthly payment would repay a $28,500 car loan over 60 months, assuming your loan has an interest rate of 3.9% per year, compounded monthly?

A. 492

B. 764

C. 423

D. 550

E. 523

View answer

Correct Answer: E

Question #34

Use the following financial data on Enterprise:

A. ale of equipment $32,000

B. oss on equipment sale $9,000

C. ividends paid $12,500

D. urchase of an office suite $104,000

E. ommon stock repurchase $45,000

View answer

Correct Answer: C

Question #35

Julius Christus is an AIMR member and a vice president in the Risk Control department of a major commercial bank. Julius recently discovered that Jill Chapman had been grossly negligent in her duties involving monitoring of trading limits and violations by the trading desk. This is the first time Jill has been found to be remiss in her duties. Which of the following actions is the minimum necessary for Julius to be in compliance with Standard III (E) - Responsibilities of Supervisors?

A. nitiate an inquiry and take steps, such as placing limits on Jill's activities and increasing the monitoring of her activities to ensure that future violations do not occur

B. etermine the extent of the violations and warn Jill in no uncertain terms that a repeat incidence would lead to her losing the job

C. erminate Jill's employment

D. eport the misconduct to his superiors and warn Jill in writing that future misconduct would lead to immediate termination of employment

View answer

Correct Answer: A

Question #36

The cash spent on replacing operating capacity used up in the normal course of business is classified as:

A. nvesting cash flow

B. perating cash flow

C. ither operating cash flow and investing cash flow

D. inancing cash flow

View answer

Correct Answer: A

Question #37

What is another name for the alternate hypothesis?

A. one of these answers

B. ejected hypothesis

C. esearch hypothesis

D. ull hypothesis

View answer

Correct Answer: C

Question #38

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

A. one of these answers

B. ncrease working capital

C. ecrease working capital and the current ratio

D. ncrease both working capital and the current ratio

E. ecrease only working capital

View answer

Correct Answer: D

Question #39

What is the difference between a sample mean and the population mean called?

A. ampling error

B. oint estimate

C. tandard error of the mean

D. one of these answers

E. nterval estimate

View answer

Correct Answer: A

Question #40

Which of the following statements about the Securities and Exchange Commission (SEC) is true?

A. he SEC must audit all financial statements of publicly traded corporations

B. he SEC has issued specific rules and regulations concerning the preparation of financial statements and the degree of detail that they contain

C. one of these statements are true

D. he SEC functions as the standard-setting body of the accounting profession

View answer

Correct Answer: B

Question #41

Tiarera has just landed a big account for her fund and is in a joyous mood. To celebrate, she decides to go out to a bar with some of her friends and share some drinks. Tiarera, however, has a weak constitution and cannot handle alcohol very well. In fact, many times in the past, she has gotten into drunken altercations at bars. Tonight turns out to be no different; Tiarera and her friends are arrested for disorderly conduct and convicted for misdemeanor. Tiarera has

A. as violated Standard II (B) - Professional Misconduct - because of a pattern of misconduct

B. ot violated any AIMR standard since the arrest was for a misdemeanor, an offense not serious enough to trigger sanctions on the first occurrence

C. as violated Standard II (B) - Professional Misconduct - because she has been involved in a misdemeanor

D. ot violated any AIMR standard since the arrest took place due to activities not related to her work

View answer

Correct Answer: A

Question #42

Which of the following is/are true?

A. he mean of a sample represents its average value

B. II only

C. V only

D. I only

E. only

View answer

Correct Answer: H

Question #43

An economy is currently experiencing high inflation. A Keynesian would suggest which of the following to combat this:

A. ncreasing interest rates

B. & III

C. , II, III & IV

D. , II & III

E. I & III

View answer

Correct Answer: D

Question #44

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

A. iolated Standard IV (B

B. iolated Standard IV (A

C. iolated Standard IV (B

D. ot violated any standards

View answer

Correct Answer: D

Question #45

Both a fixed exchange rate and ________ can be maintained if a country is willing to use its monetary policy to maintain the fixed exchange rate.

A. urrent account deficit

B. urrency convertibility

C. apital account surplus

D. apital account deficit

E. urrent account surplus

View answer

Correct Answer: B

Question #46

In order to comply with Standard IV (B.4), Priority of Transactions, firms should prepare and distribute to firm personnel a code of ethics and compliance procedures. The code and procedures should do all of the following, EXCEPT:

A. nsure that procedures will be enforced

B. ontain disciplinary procedures

C. imit the number of access persons

D. stablish reporting and prior-clearance requirements

E. efine personal transactions, investment and prohibited transactions

View answer

Correct Answer: F

Question #47

Which of the following is true?

A. DP = GNP + (income of citizens received for factors of production supplied abroad) - (income paid to foreigners for their contribution to domestic output)

B. he GDP is always larger than GNP since it includes the output produced by foreign nationals living in the country

C. he GNP is always larger than GDP since it includes the income by the country's citizens living abroad

D. NP = GDP + (income of citizens received for factors of production supplied abroad) - (income paid to foreigners for their contribution to domestic output)

View answer

Correct Answer: D

Question #48

In the country of Merlenia, authorities require that tax reports and financial reports be identical. In Merlenia, there will be:

A. o recognition of deferred taxes

B. prevalence of LIFO accounting

C. o advantage to capitalizing a lease

D. o off-Balance-sheet financing

View answer

Correct Answer: A

Question #49

Suppose the average stock price in the above example were 40. How many shares will be used in the calculation of Diluted EPS now?

A. one of these answers

B. ,250,000

C. ,208,333

D. ,300,000

View answer

Correct Answer: C

Question #50

Which of the following AIMR standards states that a member shall not knowingly participate, or assist, in any violation of applicable laws, regulations, or the Code and Standards?

A. II

B. I

C.

D.

View answer

Correct Answer: D

Question #51

David's gasoline station offers 4 cents off per gallon if the customer pays in cash and does not use a credit card. Past evidence indicates that 40% of all customers pay in cash. During a one-hour period twenty-five customers buy gasoline at this station. What is the probability that at least ten pay in cash?

A. one of these answers

B.

C.

D.

E.

View answer

Correct Answer: B

Question #52

Which combination leads to the lowest income tax paid in earlier years of a firm?Inventory valuationDepreciation

A. IFOStraight-lineII

B. V

C. I

D.

E. II

View answer

Correct Answer: A

Question #53

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

A. egatively skewed

B. annot be predicted in advance

C. ositively skewed

D. one of these answers

E. pproaches a normal distribution

View answer

Correct Answer: E

Question #54

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

A. ecrease, increase

B. ncrease, decrease

C. o change, decrease

D. oth increase

E. o change for either

View answer

Correct Answer: F

Question #55

Morgan Dexter has been asked by his supervisor to present the features of interest rate swaps to a group of newly hired risk managers. In his presentation, Dexter notes that in a plain-vanilla interest rate swap, there is one floating rate-payer and one fixed-rate payer. Dexter points out that the netting arrangements typical to plain vanilla swaps reduce the credit risk for both counter parties Dexter also states that some interest rate swaps may have two floating rate payers. Are Dexter *s statements rega

A. nly Dexter's statement about reduced credit risk from netting is correct

B. nly Dexter's statement about two floating rate payers is correct

C. oth statements are correct

View answer

Correct Answer: C

Question #56

The statement of cash flows provides us with important clues on all of the following except:

A. inancial practices of management

B. rojected changes for the following year in current liability accounts

C. easibility of financing capital expenditures

D. bility to meet debt service requirements

View answer

Correct Answer: B

Question #57

When a domestic resident purchases a foreign stock directly on the foreign stock exchange, the transaction is entered as a ________ in the BOP account.

A. eficit

B. urplus

C. redit

D. ebit

View answer

Correct Answer: D

Question #58

Under what condition would a firm report cash, or cash equivalents as a long-term asset?

A. hen a firm maintains less than its' minimum target cash balance

B. hen funds are set aside for a specific long-term purpose such as plant expansion

C. ll of these answers

D. hen a firm has an under-funded pension obligation

E. one of these answers

View answer

Correct Answer: B

Question #59

If you have $5,000 in an account today and withdraw $2,000 in 3 years, how much can you withdraw from the account in 5 years, if the account earns interest at 8% per year, compounded annually?

A. 3,000

B. 5,013

C. 4,407

D. 5,714

E. 2,000

View answer

Correct Answer: B

Question #60

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

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

B. riginal cost minus accumulated depreciation equals cash received minus loss on disposal

C. ook value of the asset plus loss on disposal equals cash received

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

View answer

Correct Answer: A

Question #61

Fiduciary duty includes a duty of loyalty and a reasonable standard of ________.

A. are

B. one of these answers

C. rudence

D. ustody

View answer

Correct Answer: A

Question #62

The following account is affected when recording a return of inventory to the vendor under a perpetual inventory system.

A. urchase returns and allowances

B. ccounts receivable

C. ash

D. erchandise inventory

View answer

Correct Answer: D

Question #63

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

A. upervisors

B. mployers

C. mployees

D. he Investing Public

E. one of these answers

View answer

Correct Answer: D

Question #64

A survey of passengers on domestic flights revealed these miles:Miles Flown Number of Passengers100 - 49916500 - 89941900 - 1299811300 - 1699111700 - 209992100 - 24996What is the range (in miles)?

A. ,100

B. ,999

C. ,499

D. ,399

E. one of these answers

View answer

Correct Answer: D

Question #65

If you deposit $245 into an account paying 5.5% per year simple interest, how much interest will be earned after 15 months?

A. 259

B. 15

C. 202

D. 261

E. 16

View answer

Correct Answer: E

Question #66

Under Standard IV (B.6), Prohibition against Misrepresentation, a member may discuss a "guaranteed" investment, as long as that investment is which of the following?

A. omestic stocks

B. oreign stocks

C. edium-term notes

D. ong-term bonds

E. one of these answers

View answer

Correct Answer: F

Question #67

A firm has total assets of 5,320, net sales of 8,395, average receivables of 894, current assets of 2,393 and a current ratio of 1.2. Its average receivables collection period equals ________.

A. 1

B. 9

C. 3

D. 8

E. eceivables turnover ratio = Net annual sales/average receivables

View answer

Correct Answer: D

Question #68

If a company estimates that its expected return on pension plan assets will increase to 9.5% from 9.0% this would be considered ________.

A. n extraordinary gain

B. change in accounting estimate

C. prior period adjustment

D. change in accounting principle

View answer

Correct Answer: B

Question #69

Monthly commissions of first-year insurance brokers are $1,270, $1,310, $1,680, $1,380, $1,410, $1,570, $1,180 and $1,420. These figures are referred to as:

A. one of these answers

B. aw data

C. requency distribution

D. give

E. istogram

View answer

Correct Answer: B

Question #70

The domestic demand Q for a good X at a price P is given by Q = 400 - 2P while the supply function is given by 100 + 4P. The world price for good X is 45 in international markets. All quantities are in thousands of units. If the government imposes a tariff of 5% on imports, the imports will fall by:

A.

B. 3

C. 6

D. 9

View answer

Correct Answer: C

Question #71

The consistency principle

A. equires that the company use a selected accounting method period after period

B. ll of these answers are correct

C. s limited to inventory pricing methods

D. equires that a company use one inventory method exclusively

View answer

Correct Answer: A

Question #72

Which accounting principle is consistent with reporting financial results that can be compared with previous periods?

A. dequate disclosure

B. atching

C. onsistency

D. ateriality

View answer

Correct Answer: C

Question #73

The GAAP require inventory to be valued using ________.

A. ower of market or cost

B. IFO or FIFO

C. IFO

D. IFO

View answer

Correct Answer: A

Question #74

Suppose that you write an investment newsletter. You track 12 stocks, and you classify these stocks into equal- sized categories of buy, sell, and hold. How many different ways can you classify these stocks into thosecategories?

A. 4,860

B. 6,540

C. 4,680

D. 4,650

View answer

Correct Answer: D

Question #75

A tire manufacturer advertises that "one-half of our new all-season radial tire last at least 50,000 miles. An immediate adjustment will be made on any tire that does not last 50,000 miles." You purchased four of these tires. What is the probability that all four tires will wear out before traveling 50,000 miles?

A. one of these answers

B. /10, or 0

C. /4, or 0

D. /16, or 0

E. /64, or 0

View answer

Correct Answer: D

Question #76

The Performance Presentation Standards maintain that composites should cover a minimum of ________ years, or present the entire record of the firm, if shorter.

A. en

B. ight

C. even

D. wo

E. ive

View answer

Correct Answer: A

Question #77

Which measures of central tendency are not affected by extremely low or extremely high values?

A. one of these answers

B. eometric mean and mean

C. ean and mode

D. ode and median

E. ean and median

View answer

Correct Answer: D

Question #78

Suppose we set the criterion for the rejection of the null that is extremely stringent, assuring us that the null will be definitely rejected. Then, which of the following is/are true?

A. he probability of a Type I error is zero

B. I only

C. one of these answers

D. only

E. I & III

View answer

Correct Answer: D

Question #79

In the Keynesian model, if the multiplier is 3, then ________.

A. PS must be approximately

B. PC must be approximately 2/3

C. PC must be approximately

D. PC must be approximately 1/3

E. PS must be approximately 2/3

View answer

Correct Answer: D

Question #80

Portfolios

A. an be switched from one composite to another at any time at the discretion of the investment manager

B. an never be switched from one composite to another, so managers must ensure they consult their clients and make appropriate choices

C. ust not be switched from one composite to another unless documented changes in client guidelines make switching appropriate

D. an only be switched from one composite to another at the end of a performance period and only if documented changes in client guidelines make switching appropriate

View answer

Correct Answer: C

Question #81

Recent data reveal that the ratio of inventories to sales has risen sharply, suggesting that businesses are experiencing an unplanned build-up in inventories. According to the Keynesian model, these findings indicate that

A. he economy is operating at full-employment equilibrium, which will probably be sustained in the foreseeable future

B. ggregate expenditures exceed output and, as a result, inflation is likely to accelerate

C. ggregate expenditures exceed output and, as a result, national income will rise

D. ggregate expenditures are less than output and, as a result, national income will decline

View answer

Correct Answer: D

Question #82

Two events, A and B, are independent if:

A. (A and B) = 1

B. (A and B) = P(A) + P(B)

C. (A and B) = 0

D. (A and B) = P(A) P(B)

View answer

Correct Answer: D

Question #83

Brokers who knowingly or recklessly engage in excessive trading in customers' accounts are known to be ________.

A. ver-selling

B. ixing

C. hurning

D. one of these answers

E. hingling

View answer

Correct Answer: C

Question #84

An increase in the nominal interest rate would

A. ncourage people to hold larger money balances

B. ause households to increase consumption

C. ncourage people to hold smaller money balances

D. orce the Fed to reduce the money supply

View answer

Correct Answer: C

Question #85

Which of the following is/are discrete random variables? I. The height of a student selected at random from 217 students. II. The slot number where the ball comes to rest in a roulette wheel. III. The color of a playing card drawn at random from a pack. IV. The speed of a car tracked by the radar gun of highway patrol.

A. V only

B. I & III

C. , II & IV

D. I only

E. II only

View answer

Correct Answer: B

Question #86

Rob Ealey, CFA, has just purchased an option-free bond with a 6.50% coupon that is currently selling at 94.73 to yield 7.25%. If yields increase by 50 bps, the new price of the bonds would be 91.41, and if yields decrease by 50 bps the new price of the bond would be 98.20. Determine the approximate new price of the bond if yields decrease by 75 basis points.

A. 9

B. 9

C. 04

View answer

Correct Answer: B

Question #87

When the Percentage of Sales method is used, the estimated bad debt expense is calculated by

A. ividing total sales on account by the percentage

B. ubtracting the percentage of net sales on account from the balance of allowance for uncollectible accounts

C. ultiplying total sales on account times the percentage

D. ultiplying net sales on account times the percentage

View answer

Correct Answer: D

Question #88

As an analyst for Donavan Financial Advisors, Lou Marvin must estimate the appropriate inputs for the firm's equity valuation models. Donavan's preferred valuation model is the single-stage dividend discount model (DDM). Members of Marvin's valuation team have supplied him with several pieces of data related to TMQ Utilities, including the company's earnings and dividends from the most recent year, the expected real risk-free rale, and the expected nominal growth in net income. To estimate the value of TMQ

A. rice-to-cash flow ratio and the expected cash flow per share

B. xpected rate of inflation and the expected earnings retention rate

C. istorical growth rates in dividends and the required return on the Utility bond index

View answer

Correct Answer: B

Question #89

A sample of assistant professors on the business faculty at state supported institutions in Ohio revealed the mean income to be $32,000 for 9 months with a standard deviation of $3,000. Using Chebyshev's Theorem, what is the proportion of faculty that earn more than $26,000 but less than $38,000?

A. t least 25%

B. one of these answers

C. t least 75%

D. t least 100%

E. t least 50%

View answer

Correct Answer: C

Question #90

Below is an example of an incorrectly prepared statement of cash flows. The descriptions of activities are correct.Cash from operating activities$60,000Net Income(4,000)Depreciation(2,000)Increase in accounts receivable(1,000)Increase in deferred tax liability$53,000Cash from investing activities($48,000)Purchase of marketable securities2,500Dividends received1,500Dividends paid($44,000)Cash from financing activities(500)Increase in Short-term debt(2,500)Increase in Long-term debt($3,000)Increase in cash$6,

A. one of these answers

B. 19,000

C. 15,000

D. 4,000

View answer

Correct Answer: B

Question #91

How many years would it take for a deposit of $10,000 to become $200,000, if interest of 9% per year is compounded annually?

A. 00

B. 8

C. 34

D. 4

E.

View answer

Correct Answer: D

Question #92

Which of the following best describes an income statement?

A. n income statement reports changes over a period of time in component accounts that comprise the ownership of a firm

B. n income statement details the cash inflows and outflows that are related to a company's operating, investing, and financing activities over a period of time

C. one of these answers

D. n income statement summarizes the financial position of a company at a given point in time

E. n income statement measures a company's financial performance over a specified period of time

View answer

Correct Answer: E

Question #93

A company is currently being sued by a customer. A reasonable estimate can be made of the costs that would result from a ruling unfavorable to the company, and the amount involved is material. The company's managers, lawyers, and auditors agree that there is a remote likelihood of an unfavorable ruling. This contingency

A. one of these answers

B. hould be disclosed as a parenthetical comment in the balance sheet

C. hould be disclosed as an appropriation of retained earnings

D. hould be disclosed in a footnote

E. eed not be disclosed in a footnote

View answer

Correct Answer: E

Question #94

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

A. he goods or services purchased must be for "brokerage service

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

C. one of these answers

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

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

View answer

Correct Answer: A

Question #95

If you owe a debt of $3,000 today and also owe $5,000 in 24 months, what single payment could you make 15 months from today that would pay off both of these debts, if interest is assessed at 8% per year, compounded monthly?

A. 8,024

B. 7,751

C. 7,980

D. 8,000

E. 9,041

View answer

Correct Answer: A

Question #96

In the basic Keynesian model of national income determination, aggregate expenditures refer to

A. he amount of demand for consumer goods that would arise if all citizens had all the income they wanted

B. he combined expenditures of consumers and businesses minus government spending

C. pending for consumption, investment and exports less imports plus government purchases of goods and services

D. onsumer spending measured in constant prices

E. he amount of GDP that could be produced if unemployment were zero

View answer

Correct Answer: C

Question #97

The weight of an offensive lineman may be 210 pounds, 210.1 pounds, 210.13 pounds or 210.137 pounds depending on the accuracy of the scale. What is this an illustration of?

A. one of these answers

B. iscrete random variable

C. ontinuous random variable

D. ll of these answers

E. omplement rule

View answer

Correct Answer: C

Question #98

A sample of the personnel files of eight male employees revealed that during a six month period, they lost the following number of days due to illness: 2, 0, 6, 3, 10, 4, 1 and 2. What is the mean deviation (in days)?

A. 3/8

B. one of these answers

C.

D.

E. 1/8

View answer

Correct Answer: A

Question #99

Frank Holmes, CFA, is reviewing Martha Inc, a distributor. Holmes is interested in the company's European- style call option, which has a value of $5.90. Currently, Martha's stock is trading at $33 per share and pays no dividend. The exercise price of both the call and put options is $30, with 80 days to expiration. The current risk- free rate is 5.50%. Martha's put option sells for $2.75. Calculate the synthetic call option value.

A. 3

B. 5

C. 6

View answer

Correct Answer: C

Question #100

In periods of rising prices, which inventory costing method results in the smallest income tax expense?

A. verage cost

B. erpetual

C. IFO

D. IFO

View answer

Correct Answer: D

Question #101

Each ________ needs to comprise portfolios or asset classes that represent a similar investment goal.

A. eturn

B. omposite

C. alue

D. enchmark

E. ix

View answer

Correct Answer: B

Question #102

Quasar, Inc., currently shows assets worth 5,000 and a debt of 1,500. During the year, it capitalized interest expense worth 300, of which 60 was amortized. Quasar's tax rate is 50%. If it had expensed the interest paid, which of the following would be true?

A. ts operating cash flow would be lower by 150

B. ts tax expense would be lower by 150

C. ts equity would be higher by 300

D. ts operating cash flow would be lower by 300

View answer

Correct Answer: A

Question #103

Which of the following would increase GDP?

A. uying a 10-year-old house

B. iving $100 to a charity

C. uying a new automobile made in Indiana by a Japanese owned firm

D. uying hamburger buns by McDonald's

View answer

Correct Answer: C

Question #104

How much must you deposit today in order to withdraw $1,500 in 1 year, $400 in 2 years and $1,500 in 4 years, assuming your money earns 6% per year, compounded annually?

A. 2,771

B. 2,821

C. 2,959

D. 3,029

E. 404

View answer

Correct Answer: C

Question #105

Minority interest on the consolidated balance sheet is listed ________.

A. one of these answers

B. s a liability

C. etween liabilities and shareholders' equity

D. s a component of shareholders' equity

E. s an asset

View answer

Correct Answer: C

Question #106

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

A. hey are current assets

B. only

C. I & III

D. , II & III

E. & II

View answer

Correct Answer: D

Question #107

What is the variable used to predict another variable called?

A. mportant

B. ausal

C. ndependent

D. one of these answers

E. ependent

View answer

Correct Answer: C

Question #108

A firm's quick ratio equals 1.31 and its cash ratio equals 1.19. If the firm has receivables of 693, its current liabilities equal ________.

A. ,129

B. ,693

C. ,775

D. ,926

View answer

Correct Answer: C

Question #109

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. one of these answers

C.

D. 0

View answer

Correct Answer: C

Question #110

According to SFAS 95, cash and cash equivalents includes

A. ank accounts, U

B. isk-free assets with original maturities of 90 days or less

C. isk-free assets with original maturities of 30 days or less

D. ank accounts, U

E. nly bank accounts

View answer

Correct Answer: B

Question #111

Which of the following statements is NOT correct ?

A. ll of these statements are correct

B. tandards II through V contain principles guiding the general activities of members

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

D. embers are not required to report legal violations to the appropriate governmental or regulatory organizations

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

View answer

Correct Answer: B

Question #112

The loss from an uncollectible account is:

A. n asset

B. liability

C. regular expense of doing business

D. reduction in revenue

View answer

Correct Answer: C

Question #113

Which of the following determine(s) the supply curve?

A. upply curves of factor resources

B. & III

C. II & IV

D. , II, III & IV

E. , II & III

View answer

Correct Answer: D

Question #114

What entity is presently responsible for establishing accounting standards?

A. he Financial Accounting Standards Board

B. he FDA

C. he Securities and Exchange Commission

D. he Internal Revenue Service

E. he Federal Accounting Society Board of Directors

View answer

Correct Answer: A

Question #115

With regard to a theoretical Treasury yield curve constructed with the bootstrapping method:

A. very point on the curve is constructed by utilizing current on-the-run Treasury yields of various maturities

B. he yield for most maturities used to construct the Treasury yield curve are observed yields rather than interpolated yields

C. ny yield on the Treasury yield curve that is not one of the on-the-run maturities is only an approximation for that maturity

View answer

Correct Answer: C

Question #116

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

A. eturns

B. nvestments

C. egments

D. omposites

View answer

Correct Answer: D

Question #117

If a firm uses non-discretionary leverage, it must present performance using:

A. oth actual returns and all-cash basis

B. ll-cash basis i

C. ctual returns

D. one of these answers

View answer

Correct Answer: B

Question #118

What is the Net Present Value of this series of annual cash flows using an interest rate of 15% per year: Year0: <$25,000>, Year 1: $5,000, Year 2: $0, Year 3: $30,000? (Note that the <> are used to indicate a negative number).

A. 14

B. $926

C. 258

D. $291

E. $204

View answer

Correct Answer: B

Question #119

Tracy company reports the following in its statement of cash flows:Net Income $1,000Depreciation and Amortization 350Decrease (Increase) in Accounts receivable (10)Decrease (increase) in inventory 200Decrease (increase) in prepaid expenses 80Increase (decrease) in trade payables (300)Increase (decrease) in taxes payable 75Cash Flow from operations 1,395If Tracy shows depreciation expense of $275 in its income statement, cash paid for amortization is ________.

A. 75

B. 525

C. ot determinable

D. 0

View answer

Correct Answer: D

Question #120

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

A. egal requirements

B. iduciary duties

C. one of these answers

D. ode of ethics

E. ompliance procedures

View answer

Correct Answer: E

Question #121

Which of the following is not true regarding the normal distribution?

A. t is symmetrical

B. t has a single peak

C. one of these answers

D. ean, median and mode are all equal

E. he points of the curve meet the X-axis at z = -3 and z = 3

View answer

Correct Answer: E

Question #122

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

A. evenues are recognized when goods are delivered

B. , III & IV

C. II only

D. & III

E. & IV

View answer

Correct Answer: C

Question #123

If you deposit $100 a month, beginning next month, for 20 years into an account paying 6% per year, compounded monthly, how much is in your account after that last deposit?

A. 46,204

B. 1,973,585,957

C. 24,000

D. 2,097

E. 3,678

View answer

Correct Answer: A

Question #124

Which of the following is used to calculate the actual adjustment for bad debt expense for the period?

A. ercent of accounts receivable

B. ercent of net sales

C. ging

D. ll of these answers

View answer

Correct Answer: B

Question #125

Inflation

A. auses the purchasing power of a dollar to rise

B. enerally benefits the poor at the expense of the rich

C. s measured by changes in the cost of a typical market basket of goods between time periods

D. lmost always benefits creditors at the expense of debtors

View answer

Correct Answer: C

Question #126

If an auditor issues an "adverse opinion" qualification in her opinion, she is referring to the fact that:

A. he firm's financial statements do not fairly represent the company's financial performance and position

B. here is considerable uncertainty in the firm's asset-liability valuation, thus causing a concern about its operational health

C. he firm has inadequate controls in place and needs an on-going, frequent audit

D. he firm's liquidity is in jeopardy and the firm may not survive for long

View answer

Correct Answer: A

Question #127

Companies reporting consolidated cash flows using the direct method must report all of the following cash receipts except for:

A. ther operating cash receipts, if any

B. ash from customers, including lessees, licensees and similar

C. epayments of funds from foreign subsidiaries

D. nterest and dividend payments received

View answer

Correct Answer: C

Question #128

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

A. 70

B. 70

C. 20

D. 40

View answer

Correct Answer: A

Question #129

Fifteen accounting majors had an average grade of 90 on a finance exam. Seven marketing majors averaged 85, while ten finance majors averaged 93 on the same exam. What is the weighted mean for the 32 students taking the exam?

A. one of these answers

B. 9

C. 9

D. mpossible to determine without more information

E. 9

View answer

Correct Answer: E

Question #130

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

A. hey are carried on the books at the market value

B. & III

C. , II & III

D. I & III

E. I only

View answer

Correct Answer: C

Question #131

Which of the following AIMR Standards maintains that the financial analyst must preserve the confidentiality of information communicated to him by the client?

A. V (A)

B. one of these answers

C. I (B)

D. II (C)

View answer

Correct Answer: B

Question #132

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

A. igher EPS than B

B. ower EPS than

C. ll of these answers can happen

D. he same EPS as B

View answer

Correct Answer: A

Question #133

What is the area under the normal curve for z > 1.79?

A. one of these answers

B.

C.

D.

E.

View answer

Correct Answer: E

Question #134

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

A. tandard V

B. one of these answers

C. tandard III

D. tandard II

E. tandard IV

View answer

Correct Answer: A

Question #135

One of the functions of secondary markets is that they:

A. rovide liquidity, and a financial futures contract is an example of a security trading on such a market

B. rovide liquidity, and a private placement is an example of a security trading on such a market

C. rovide fees, and a financial futures contract is an example of a security trading on such a market

View answer

Correct Answer: A

Question #136

In the presentation of real estate performance, disclose any changes in ________, including unrealized gainsand losses.

A. ccounting

B. nvestment earnings

C. aluation

D. udit practices

E. ash flow

View answer

Correct Answer: C

Question #137

The deferred income tax account

A. s where the difference between income tax expense and income tax payable is reconciled

B. s always reported as a long-term liability since the tax is not due until the next fiscal year

C. s reported as an other asset even though it has a credit balance

D. one of these answers is correct

View answer

Correct Answer: A

Question #138

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

A. 1,093

B. 1,157

C. 1,215

D. 1,213

View answer

Correct Answer: B

Question #139

Willa Dowd collected the following information for a small-cap firm that she is evaluating:Stock price per share $20.50Expected sales $920 millionOperating expenses (excluding interest) $405 millionDepreciation amortization $44 millionReturn on equity (ROE) 12%Shares outstanding 31 millionCommon shareholders' equity $380 millionThe Price/Cash Flow (P/CF) for the small-cap firm is closest to:

A.

B.

C.

View answer

Correct Answer: A

Question #140

A product financing arrangement exists when

A. he party who manufactures the inventory gives extended terms to certain preferred customers

B. party transfers ownership of inventory to a purchaser yet retains the inventory in their own warehouse

C. ll of the answers would be accounted for as product financing arrangements

D. party bearing the risks and rewards of ownership transfers inventory to a purchaser, and in a related transaction agrees to repurchase the product at a specified price over a specified time

View answer

Correct Answer: D

Question #141

Where is Unearned Revenue reported in the financial statements?

A. iability section of the balance sheet

B. evenue section of the income statement

C. sset section of the balance sheet

D. perating expense section of the income statement

View answer

Correct Answer: A

Question #142

The performance benchmark for a currency overlay portfolio must be calculated in accordance with the portfolio's mandates, unless the benchmark is the ________ on a published benchmark.

A. ax return

B. ross hedge

C. urrency return

D. ean value

E. tandard deviation

View answer

Correct Answer: C

Question #143

A fixed-income portfolio manager at Franken Investments is considering adding a security to his existing portfolio. The bond, issued by KDJ Company, has an option adjusted spread (OAS) equal to 0.23% and a Z- spread equal to 0.15%. The manager is concerned that his portfolio is dominated by callable bonds and will only accept new securities if they contain no call options. Should the portfolio manager add the KDJ bond to his portfolio?

A. es, the negative option cost implies the bond is putable

B. o, the positive option cost implies the bond is callable

C. o, the negative option cost implies the bond is callable

View answer

Correct Answer: A

Question #144

According to the quantity theory of money, which one of the following economic variables would change in response to an increase in the money supply?

A. rices

B. elocity

C. eal income

D. mployment

View answer

Correct Answer: A

Question #145

An investor purchased a stock for $60 a share using margin from his broken If the initial margin requirement is 40%, and the maintenance margin requirement is 20%, which of the following best describes the price at which a margin call will initially be triggered?

A. elow $30

B. elow $45

C. elow $48

View answer

Correct Answer: B

Question #146

A market survey was conducted to estimate the proportion of homemakers who could recognize the brand name of a cleanser based on the shape and color of the container. Of the 1,400 homemakers, 420 were able to identify the brand name. Using the 0.99 degree of confidence, the population proportion lies within what interval?

A.

B.

C.

D.

E. one of these answers

View answer

Correct Answer: B

Question #147

Which of the following information would not be filed with the SEC by a publicly company?

A. roxy statement

B. ax return

C. 0K report

D. rospectus

View answer

Correct Answer: B

Question #148

An economy is currently in equilibrium at full employment. If there is an anticipated governmental demand- stimulus policy and people correctly anticipate the effects, which of the following effects can be seen in the short run?

A. he demand curve moves to the right

B. , II, III & IV

C. , III & IV

D. & III

E. II & IV

View answer

Correct Answer: B

Question #149

A study of 200 stamping firms revealed these incomes after taxes:Income After Taxes Number of FirmsUnder $1 million 102$1 million up to $20 million 61$20 million and more 37What is the probability that a particular firm selected has $1 million or more in income after taxes?

A.

B.

C.

D.

E. one of these answers

View answer

Correct Answer: B

Question #150

A stock has the following returns over 3 years: -10%, +15%, +25%. The annual geometric rate of return over the 3 years is ________.

A. 9

B.

C. 0

D.

E. 3

View answer

Correct Answer: H

Question #151

If you deposit $204.50 into an account paying 3.15% per year simple interest, how much interest will be earned after 3 years?

A. $19

B. 19

C. 24

D. 16

E. 18

View answer

Correct Answer: B

Question #152

Which of the following is/are TRUE?

A. ccrual accounting follows the matching principle

B. , II & IV

C. , II,

D. II & IV

E. , II & III

View answer

Correct Answer: A

Question #153

The nation of Myopia is having a massive inflation problem. To stabilize prices, the Myopian Central Bank decides to acquire large numbers of Capitalian Dollars (a very stable currency) and offer to exchange five Myopian Pesos for one Capitalian Dollar on demand. How does this impact the monetary base and the effective money supply for the nation of Capitalia?

A. oth decrease

B. o change, decrease

C. ecrease, increase

D. o change, increase

E. o change for either

View answer

Correct Answer: B

Question #154

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

A. oyalty

B. udgment

C. one of these answers

D. agacity

E. rudence

View answer

Correct Answer: A

Question #155

Patterson Company has the following information of one of its vehicles purchased on January 1, 1992:Vehicle cost $50,000Useful life, years, estimated 5Useful life, miles, estimated 100,000Salvage value, estimated $10,000Actual miles driven:1992 30,0001993 20,0001994 15,0001995 25,0001996 12,000No estimates were changed during the life of the asset. The 1996 depreciation expense using the units-of- production method was ________.

A. 4,800

B. 4,000

C. 6,000

D. 10,000

E. 5,000

View answer

Correct Answer: B

Question #156

The chairman of the House Ways and Means committee, who has major sway on spending programs, has been researching the economy and believes that the nation is heading for an inflationary spiral. Inflation iscurrently not considered a problem. He proposes a fiscal policy solution. Which of the following would not impede his proposition from alleviating the problem?

A. ongressional opposition to spending cutsII

B. ecognition lag

C. II, IV

D. , II, IV, V

E. I, IV, V

View answer

Correct Answer: B

Question #157

A benefit period for accounting amortization can not exceed how many years ________.

A. 5

B. 0

C. 0

D. 5

View answer

Correct Answer: B

Question #158

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

A. 33

B. 35

C. 35

D. 33

View answer

Correct Answer: D

Question #159

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

A.

B.

C.

D.

E. one of these answers

View answer

Correct Answer: D

Question #160

For the normal distribution, the mean plus and minus 1.96 standard deviations will include about what percent of the observations?

A. one of these answers

B. 0%

C. 8%

D. 5%

E. 9

View answer

Correct Answer: D

Question #161

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

A. 398

B. 1,411

C. 448

D. 397

E. 445

View answer

Correct Answer: E

Question #162

Archie Boone, CFA, is the managing director at Hoffman Advisors, an alternative investment management company. Boone is reviewing the work of a real estate analyst and finds that in calculating net operating income (NOI) for a property, the analyst has understated vacancy by $3,000, overstated depreciation expense by $4,000, overstated insurance expense by $4,000, and understated interest expense by $2,000. If Boone corrects the analyst's estimates of NOI for all these items, the updated estimate will:

A. ncrease by $1,000 as the restatement of vacancy will be partially offset by the restatement of insurance expense

B. ncrease by $1,000 as the restatement of depreciation expense will be partially offset by the restatement of vacancy

C. ecrease by $1,000 as the restatement of insurance expense will be more than offset by the restatement of vacancy and interest expense

View answer

Correct Answer: A

Question #163

In a systematic random sampling method,

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

B. sample is selected by randomly from within the first N members of the population and then selecting every Nth member of the population

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

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

View answer

Correct Answer: B

Question #164

Which of the following are changes in accounting principle?

A. change from LIFO to FIFOII

B. , II, III and IV

C. , II and III

D. , III and IV

E. and III

View answer

Correct Answer: D

Question #165

If you have $4,000 in an account today and withdraw $2,000 in 3 years, how much can you withdraw from the account in 5 years, if the account earns interest at 8% per year, compounded annually?

A. 3,544

B. 3,407

C. 3,000

D. 2,000

E. 7,714

View answer

Correct Answer: A

Question #166

Peterson Manufacturing has earnings per share of $4.00 and paid a dividend of $1.00 per share. Peterson's return on equity is 16.0%. Peterson is considering a debt issue that would increase its financial leverage. Peterson is also considering increasing its dividend payout ratio. Assuming all other factors are constant, Peterson's potential growth rate:

A. ill increase due to the increased leverage, and increase further due to the higher payout ratio

B. ill increase due to the higher payout ratio, but this increase will be offset to some extent by the increased leverage

C. ill increase due to the increased leverage, but this increase will be offset to some extent by the higher payout ratio

View answer

Correct Answer: C

Question #167

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

A. tock dividends lead to a decrease in the retained earnings account

B. I & III

C. & III

D. , II & III

E. only

View answer

Correct Answer: C

Question #168

Which of the following is/ are true?

A. ssets = Equity + LiabilitiesII

B. I & IV

C. only

D. & II

E. II only

View answer

Correct Answer: B

Question #169

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

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

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

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

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

View answer

Correct Answer: D

Question #170

The mean amount spent by a family of four on food per month is $500 with a standard deviation of $75. Assuming that the food costs are normally distributed, what is the probability that a family spends less than $410 per month?

A.

B.

C. one of these answers

D.

E.

View answer

Correct Answer: A

Question #171

Warranty liabilities:

A. esult when a company sells a product

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

C. ll of these answers are correct

D. re estimated liabilities

View answer

Correct Answer: C

Question #172

Standard IV (B.4), Priority of Transactions, suggests implementing "________" in certain organizations to limit the number of access persons.

A. ag Orders

B. imit Orders

C. oison Pills

D. oken Confines

E. ences

View answer

Correct Answer: F

Question #173

Which of the following is/are required by AIMR-PPS with regards to calculation of returns?

A. he return for after-tax composites that hold both taxable and tax-exempt securities should be stated on an equivalent, "pre-tax" basis

B. , II and III

C. II only

D. and III only

E. one of them

View answer

Correct Answer: D

Question #174

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

A. isk tolerance

B. iquidity needs

C. xpected cash flows

D. egulatory and legal circumstances

E. ime horizon

View answer

Correct Answer: A

Question #175

Which of the following would be counted in the calculation of GDP?

A. he sale of cocaine in the black market

B. he broker's fees from the sale of 100 shares of IBM stock

C. amage to a house caused by a hurricane

D. he sale of a rare coin to a coin collector

View answer

Correct Answer: B

Question #176

Michelieu tells a prospective client, "I may not have a long-term track record yet, but I'm sure that you'll be very pleased with my recommendations and service. In the three years that I've been in the business, my equity- oriented clients have averaged a total return of more than 26 percent a year." The statement is true, but Michelieu only has a few clients and one of his clients took a large position in a penny stock (against Michelieu's advice) and realized a huge gain. This large return caused the ave

A. es, because the statement misrepresents Michelieu's track record

B. es, because the statement about return ignores the risk preferences of his clients

C. o, because the statement is a true and accurate description of Michelieu's track record

D. o, because Michelieu is not promising that he can earn a 26 percent return in the future

View answer

Correct Answer: A

Question #177

An employee had the following percentage increases in salary over the last 5 years: 4%, 7%, 10%, 15%, 12%.The geometric mean of his salary increases equals ________.

A.

B.

C.

D.

View answer

Correct Answer: D

Question #178

________ accounting is mandatory for fixed-income securities.

A. ccrual

B. ash

C. lexible

D. qual

E. isk-free

View answer

Correct Answer: A

Question #179

Emmy Noether is a senior division manager at Harding & Harding, a money management firm. Emmy is quite fastidious about following the rules of the investment industry and has established specific procedures and guidelines designed to prevent any violations. Recently, it surfaced that one of the employees reporting to Emmy, William Bathwater, had been secretly using inside information on a computer maker to generate profits in his portfolio. William had been extremely clever at hiding these profits and only

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

B. one of these answers

C. iolated Standard III (E) - Responsibilities of Supervisors - by failing to check William's behavior

D. iolated Standard III (B) - Duty to the Employer - by failing to check William's behavior

View answer

Correct Answer: A

Question #180

Two otherwise identical firms, A and B, have one difference. A has a higher interest expense than B, arising from its higher reliance on debt financing. All other accounting statistics, including net sales and expenses are equal for the two firms. The return on total capital for firm A will be __________ that for firm B.

A. ame as

B. nsufficient information to answer the question

C. ower than

D. igher than

View answer

Correct Answer: D

Question #181

In a period of falling prices, the inventory method that gives the lowest possible value for ending inventory is

A. IFO

B. IFO

C. ross profit

D. eighted average

View answer

Correct Answer: A

Question #182

An increase in the long-run aggregate supply curve indicates that

A. nemployment has increased

B. mployment has increased

C. atural unemployment has increased

D. otential real GDP has increased

View answer

Correct Answer: D

Question #183

Suppose the probability that oil prices will rise any given quarter is 0.51, and the probability that oil prices will stay level or decline is 0.49. If oil prices rise, GNP will contract by 1% with 80% probability, and expand by 0.5% with 20% probability. If oil prices decline or stay level, GNP will expand 3% with a 75% probability and contract 0.5% with a 25% probability. What is the expected change in GNP in the next quarter?

A. 0

B. 0

C. 0

D. 0

View answer

Correct Answer: A

Question #184

Regarding financial accounting for public companies, the role of the SEC as currently practiced is to

A. ake rules and regulations regarding filings with the SEC but not to regulate annual or quarterly reports to shareholders

B. evelop and promulgate most generally accepted accounting principles

C. ake rules and regulations pertaining more to disclosure of financial information than to the establishment of accounting recognition and measurement principles

D. one of these answers

E. egulate financial disclosures for corporate, state, and municipal reporting

View answer

Correct Answer: C

Question #185

Bay Co. purchased a 3-month U.S. Treasury bill. In preparing Bay's statement of cash flows, this purchase would

A. ave no effect

B. e treated as an outflow from lending activities

C. e treated as an outflow from financing activities

D. e treated as an outflow from operating activities

E. e treated as an outflow from investing activities

View answer

Correct Answer: A

Question #186

Augusta Sevilla has made the statements about company analysis and stock valuation:Statement 1:A growth company is a growth stock. A growth company has opportunities to make investments that yield returns above the firm's required rate of return. A growth company also offers higher rates of return on investments in its shares they are undervalued and generate high returns when complete information about the company arrives in the marketplace.Statement 2:A defensive stock has a low, but not negative, beta. A

A. oth statements are incorrect

B. nly Statement 1 is correct

C. nly Statement 2 is correct

View answer

Correct Answer: A

Question #187

If a frequency distribution has open-ended intervals at the extremes, which measure of central tendency is the most difficult to estimate?

A. ean

B. one of these answers

C. edian

D. ll of these answers

E. ode

View answer

Correct Answer: A

Question #188

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

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

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

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

D. mall incremental principal repayments; predictable current income

E. one of these answers

View answer

Correct Answer: B

Question #189

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

A. 2,981

B. 5,077

C. 3,059

D. 3,224

E. 3,104

View answer

Correct Answer: C

Question #190

Kerry Garrett, CFA, manages a hedge fund. The hedge fund industry has enjoyed strong growth over the past ten years. Garrett states that the hedge fund industry has a goal of absolute returns. In addition, Garrett states that the industry's high Sharpe ratio indicates that hedge funds are superior investment vehicles. Is Garrett correct with regard to his statement on hedge fund returns and/or his statement on hedge funds as superior investment vehicles?

A. nly the statement on return is correct

B. nly the statement on superiority is correct

C. one

View answer

Correct Answer: A

Question #191

According to the AIMR-PPS when presenting results, annual returns for all years must be presented.Performance for periods of less than one year

A. ust be treated as all of the other performance results

B. ust not be included in the presentation

C. ust not be annualized

D. ust be prorated and appropriate disclosures made

View answer

Correct Answer: C

Question #192

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

A.

B.

C.

D.

E.

View answer

Correct Answer: E

Question #193

Use the following financial data on Enterprise:

A. ale of equipment $32,000

B. oss on equipment sale $9,000

C. ividends paid $12,500

D. urchase of an office suite $104,000

E. ommon stock repurchase $45,000

View answer

Correct Answer: C

Question #194

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

A. 193

B. 191

C. 209

D. 105

E. 106

View answer

Correct Answer: D

Question #195

According to the Prudent Investor Rule, the trustee must:- adhere to loyalty, impartiality and ________- 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. ommitment

B. one of these answers

C. rudence

D. iversification

E. upervisors

View answer

Correct Answer: C

Question #196

William Henry, a quantitative analyst with Smith, Kleen & Beetchnutty Brokerage, is examining a data sample and has amassed the following information:Standard deviation of the sample: 0.97Number of observations: 109Degrees of freedom: 2Sample mean: 11.03Assume that Mr. Henry formulates a null hypothesis that states that the value of the population mean is equal to zero. Additionally, assume that the population standard deviation is unknown. Given this information, what is the standard error of the estimate?

A.

B.

C.

D. one of these answers is correct

E.

View answer

Correct Answer: B

Question #197

The mean of a normal distribution is 400 pounds. The standard deviation is 10 pounds. What is the area between 415 pounds and the mean of 400 pounds?

A. one of these answers

B.

C.

D.

E.

View answer

Correct Answer: B

Question #198

If prices in two countries are rising at the same annual rate, then the prices of imports and exports will:

A. ncrease in the country with the more valuable currency and decrease in the country with the less valuable currency

B. ncrease relative to domestically produced goods

C. ecrease relative to domestically produced goods

D. one of these answers

E. emain unchanged relative to domestically produced goods

View answer

Correct Answer: E

Question #199

A firm has a high debt-to-asset ratio. In an inflationary environment, in order to improve this ratio in earlier years, it will prefer:

A. IFO inventory valuation and accelerated depreciation

B. IFO inventory valuation and straight-line depreciation

C. IFO inventory valuation and straight-line depreciation

D. IFO inventory valuation and accelerated depreciation

View answer

Correct Answer: B

Question #200

Which of the following will most affect the valuation of a firm's receivables?

A. he rate of sales growth

B. one of these answers

C. he type of business that a firm is engaged in

D. he allowance for uncollectible accounts

E. he seasonality of a company's products

View answer

Correct Answer: D

Question #201

Another name for "covered" person is ________.

A. uardian

B. one of these answers

C. mbudsman

D. ccess person

E. iduciary

View answer

Correct Answer: D

Question #202

If you deposit $900 a year, beginning next year, for 20 years into an account paying 8% per year, compounded annually, how much is in your account after that last deposit?

A. 40,598

B. 50,003

C. 530,118

D. 48,304

E. 41,185

View answer

Correct Answer: E

Question #203

If you make an initial deposit $500 now into an account, an additional deposit of $800 in 2 years, and a final deposit of $300 in 4 years, how much is in your account in 5 years? Assume the account earns interest at 8% per year, compounded annually.

A. 2,120

B. 2,408

C. 2,066

D. 1,905

E. 2,331

View answer

Correct Answer: C

Question #204

Which of the following is NOT true about the responsibilities of a member with supervisory duties, as specified by Standard III (E) - Responsibilities of Supervisors?

A. ompliance activities must be designed to anticipate the activities most likely to result in misconduct

B. ompliance procedures must meet industry and regulatory standards

C. he supervisor is always accountable for the violations committed by those who report to him

D. f a member cannot discharge supervisory responsibilities due to an absence of compliance system, he or she should decline to accept the duties in writing till such a system is put into effect

View answer

Correct Answer: C

Question #205

Book value of a company is equal to all of the following except

A. he amount resulting if the company were to liquidate at amounts reported on the balance sheet

B. otal assets reduced by claims against them

C. he market value of the net assets

D. et asset value

View answer

Correct Answer: C

Question #206

If you buy an item for $1,500 and agree to pay for it with 36 monthly payments of $55.50, beginning next month, what annual interest rate, compounded monthly, are you being charged?

A. 4

B. 6

C. 8

D. 1

E. 9

View answer

Correct Answer: E

Question #207

The p-value in hypothesis testing:

A. quals the significance level

B. s less than the probability of type I error

C. quals the probability of type II error

D. one of these answers

View answer

Correct Answer: D

Question #208

If the correlation coefficient between two variables equals zero, what can be said of the variables X and Y?

A. ighly correlated

B. ot correlated

C. ependent on each other

D. one of these answers are correct

E. ll of these answers are correct

View answer

Correct Answer: B

Question #209

Which type of revenue recognition method(s) is used when there is uncertainty regarding the amount or collectibility of future cash flows?

A. ercentage-of-completion and installment methods

B. ompleted contract method

C. nstallment and cost recovery methods

D. nstallment method

E. ompleted contract and cost recovery methods

View answer

Correct Answer: C

Question #210

A 10-year 5% Treasury bond is issued at a price to yield 5.2%. Three months after issuance, market rates for 10-year Treasuries decline by 100 basis points. The most likely price of this bond at issuance and three months later is:

A. bove par at issuance, but below par three months later

B. elow par at issuance, but above par three months later

C. elow par at issuance, and below par three months later

View answer

Correct Answer: B

Question #211

A thorough analysis of financial statements should include an examination of which of the following sources of information?

A. ll of these are correct

B. he report of the independent external auditor

C. anagement's discussion and analysis of its financial condition and results of operation

D. orm 10-K reports

E. xplanatory footnotes that accompany financial statements

View answer

Correct Answer: A

Question #212

The bonds of Grinder Corp. trade at a nominal spread of 150 basis points (bp) above comparable maturity U.S. Treasury securities. The option adjusted spread (OAS) on the Grinder Corp. bonds is 75 bp. Using this information, and assuming that the Treasury yield curve is flat, which of the following statements is most likely to be true?

A. he zero-volatility spread should be 75 bp

B. he zero-volatility spread for these bonds is 225 bp

C. he option cost component of these bonds should be 75 bp

View answer

Correct Answer: C

Question #213

First National Bank currently does not have the legally required cash reserves on hand. The bank expects this situation will only last a day or two. In order to rectify the reserve problem, the bank treasurer borrows cash onthe intra-bank loan market. The loan was actually granted by the Central Bank. This is the only action by the Central Bank that day. How has the Central Bank's actions impacted the demand curve for the purchase of intra-bank loans and the interest rate paid on those loans?

A. emand curve shifts upward, interest rate falls

B. emand curve shifts upward, interest rate increases

C. uantity demanded increases, interest rate falls

D. emand curve does not change, interest rate increases

E. uantity demanded decreases, interest rates rise

View answer

Correct Answer: A

Question #214

Leading economists have predicted that the Federal Reserve will continue to pursue a stable monetary policy that has characterized the last five years, keeping the price level constant into the future. Given the Fed's monetary policy, the pure expectations theory and the liquidity preference theory would predict, respectively, the following yield curve shapes:

A. lat and flat

B. pward sloping and flat

C. lat and upward sloping

View answer

Correct Answer: C

Question #215

The retail industry has __________ asset turnover ratio compared to that of a capital intensive industry like the auto industry.

A. higher

B. bout the same

C. higher and lower are both possible

D. lower

View answer

Correct Answer: A

Question #216

Level I verification requires independent attestation that portfolio returns are calculated according to a(n) ________ weighted return methodology.

A. ize

B. rice

C. ime

D. isk

E. sset

View answer

Correct Answer: C

Question #217

How much would an original deposit of $2,500 grow to be after 6 and a half years, if the deposit earns interest at 8.5% per year, compounded monthly?

A. 4,335

B. 5,541

C. 3,601

D. 10,183

E. 3,570

View answer

Correct Answer: A

Question #218

Standard IV (

A. ) relates to two major components and is titled ________ and Objectivity

A. one of these answers

B. mpartiality

C. ustice

D. utonomy

E. ndependence

View answer

Correct Answer: E

Question #219

The main purpose of a statement of cash flows of a firm is to provide relevant information about

A. ifferences between net income and associated cash receipts and disbursements

B. he cash receipts and cash disbursements of an enterprise during a period

C. firm's ability to generate future positive net cash flows

D. firm's ability to meet cash operating needs

E. one of these answers

View answer

Correct Answer: B

Question #220

Which one of the following is NOT a condition of the binomial distribution?

A. ndependent trials

B. nly two outcomes

C. robability of success remains constant from trial to trial

D. t least 10 observations

E. one of these answers

View answer

Correct Answer: D

Question #221

Under adaptive expectations, a shift to a more expansionary macroeconomic policy will

A. educe unemployment in both the short and long run

B. ail to systematically reduce unemployment in either the short run or long run

C. educe unemployment in the short run but not in the long run

D. educe unemployment in the long run but not in the short run

View answer

Correct Answer: C

Question #222

What quarterly deposit do you need to make each quarter, starting next quarter, over the next 10 years in order to have a balance of $15,000 in your account, assuming the account starts with $1,000 in it and that the interest rate is 6% per year, compounded quarterly?

A. 242

B. 1

C. 1,293

D. 203

E. 30

View answer

Correct Answer: A

Question #223

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

A. ommon stock

B. referred stock

C. ash

D. etained earnings

View answer

Correct Answer: C

Question #224

Standard IV (B.4) deals with ________.

A. isclosure of Conflicts to Clients and Prospects

B. rohibition against Misrepresentation

C. one of these answers

D. isclosure of Referral Fees

E. riority of Transactions

View answer

Correct Answer: E

Question #225

Which of the following is/are required by AIMR-PPS with regards to calculation of returns?

A. or leveraged portfolios, the stated returns must be on an "all-cash" basis, removing the effects of debt financing

B. one of them

C. , II and III

D. and III only

E. II only

View answer

Correct Answer: D

Question #226

Sterling Drachma is a senior investment consultant currently researching a few high-risk internet stock companies which recently started trading on NASDAQ. Sterling manages 5 large and private investment accounts for which he has discretionary investment authority. Sterling is about 3 years away from retirement and his retirement portfolio is managed by Franc Escudo. Sterling has concluded from his research that two of the internet stocks he has been following are great buys and instructs Franc to divert pa

A. ranc has violated Standard IV (B

B. , II and III

C. and III only

D. I and III only

E. II only

View answer

Correct Answer: D

Question #227

According to the AIMR-PPS when presenting the performance record of composites containing portfolios that use leverage, which of the following statements are true?

A. f the use of leverage is discretionary, the performance presented must include the effects of the leverage

B. f the use of leverage is discretionary, performance on a restated, all-cash basis must be provided

C. ll of these statements are true

D. f the use of leverage is nondiscretionary, performance must be presented on an all-cash basis

View answer

Correct Answer: C

Question #228

"Statistical inference" refers to the process of:

A. rawing conclusions about the entire population based on the statistical characteristics of a sample

B. rawing inferences about the characteristics of a distribution based on population data

C. redicting the statistical characteristics of a randomly drawn sample based on the knowledge about the entire population

D. electing a probability sample and the statistical method used to analyze it

View answer

Correct Answer: A

Question #229

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

A. IFO

B. one of these answers

C. verage cost method

D. ross profit method

E. IFO

View answer

Correct Answer: D

Question #230

Stewart has been hired by Goodner Industries, Inc., to manage its pension fund. Stewart's fiduciary duty is owed to:

A. he management of Goodner

B. he participants and beneficiaries of Goodner's pension plan

C. he shareholders of Goodner

D. ach of these answers equally

View answer

Correct Answer: B

Question #231

Firm A uses the completed contract method and an otherwise identical Firm B uses percentage-of- completion method for revenue recognition in a project. Then, during the project,

A. irm A shows lower assets than B

B. irm B shows higher inventory than A

C. irm A shows higher equity than B

D. irm A shows higher inventory than B

View answer

Correct Answer: D

Question #232

A firm has long-term assets worth 3,812 and total assets worth 5,937. It has a total equity of 3,934 and long term debt of 879. The firm's current ratio equals ________.

A.

B.

C.

D.

View answer

Correct Answer: D

Question #233

A piece of equipment costs $250,000, has a useful life of 10 years and an estimated salvage value of $50,000. How much depreciation expense should the company recognize in year 7 if it is using the straight-line method of depreciation?

A. 10,000

B. 25,000

C. 140,000

D. 20,000

View answer

Correct Answer: D

Question #234

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

A. IFO

B. IFO

C. ross profit method

D. eighted average

View answer

Correct Answer: B

Question #235

If an analyst is trying to estimate the value of a stock, using the formula E(Y | E) = [y_1 * P(y_1 |E) + y_2 * P (y_2|E) + ... y_n * P(y_n|E), the analyst is making use of:

A. ubjective probability

B. he multiplication rule for independent events

C. nconditional expectation

D. onditional expectation

View answer

Correct Answer: D

Question #236

Which one of the following will most likely reduce aggregate supply?

A. technological advance that reduces the cost of energy

B. n increase in the nation's net investment rate

C. n increase in the labor force participation rate

D. egulatory action that generates more benefits than costs

E. substantial increase in the minimum wage

View answer

Correct Answer: E

Question #237

Another name for flexible exchange rates is:

A. one of these answers

B. ll of these answers

C. loating exchange rates

D. oveable exchange

E. reely determined exchange

View answer

Correct Answer: C

Question #238

A boad matures in ten years, pays a 7% semiannual coupon, and is currently priced to yield 6.25%. The bond is callable at par beginning five years from now. Debbie Scott is planning to purchase this bond. Scott can currently reinvest coupon income from the bond at 5.50%. Which of the following statements is least accurate?

A. f the bond is called in six years, Scott's return will be less than 6

B. f Scott's reinvestment rate was 6

C. f the bond was priced to yield 5

View answer

Correct Answer: C

Question #239

Albert and Tye, who recently started their own investment advisory business, have registered to take the Level III CFA examination. Albert's business card reads, "Judy Albert, CFA Candidate." Tye has not put anything about the CFA designation on his business card, but promotional material that he designed for the business describes the CFA requirements and indicates that Tye participates in the CFA Program and completed Levels I and II. According to the Standards:

A. lbert has violated the Standards but Tye has not

B. either Albert nor Tye had violated the Standards

C. ye has violated the Standards and Albert has not

D. oth Albert and Tye have violated the Standards

View answer

Correct Answer: A

Question #240

You are given a risk-free rate of 7% per year, a portfolio return of 19% per year, and a standard deviation of portfolio return of 12% per year. What is the Sharpe measure of risk-adjusted performance?

A.

B.

C.

D.

View answer

Correct Answer: C

Question #241

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

A. 6

B.

C.

D. 7

E.

View answer

Correct Answer: E

Question #242

Rhonda McLeavon, a quantitative analyst with Churn Brothers Brokerage, has been instructed to perform a statistical analysis to test whether increases in marketing expenses amongst drug companies is positively related to institutional buying of these same companies' common stock. Rhonda begins her analysis and performs the following steps, in succession:Step 1: Formulating and stating the hypothesisStep 2: Identifying the appropriate test statistic and probability distribution Step 3: Specifying the signifi

A. one of these answers is correct

B. ollecting the data and performing the calculations

C. etermining the z-statistic

D. etermining the p-value

E. erforming and autocorrelation test to identify any heterskedasticity problems

View answer

Correct Answer: B

Question #243

Suppose you are modeling GNP, and you believe that the probability that GNP will expand if interest rates fall is 70%; if interest rates stay constant, you believe that there is a 29% chance of expanding GNP; if interest rates increase, you believe that there is a 1% chance of GNP expanding. You think that the likelihood of interest rates falling is 60%; of staying the same is 30%; of increasing is 10%. What is the unconditional probability of GNP expanding?

A. 9

B. 0

C. 0

D. 0

View answer

Correct Answer: C

Question #244

You are examining a group of 6 stocks within an industry. The industry average profit margin is expected to be 30%. For these stocks, the average profit margins have been 50%, 25%, 15%, 5%, 45%, and 30%. What is the mean absolute deviation of profit margins from the industry average?

A. 3

B. 3

C. 3

D. 3

View answer

Correct Answer: A

Question #245

Chances are 50-50 that a newborn baby will be a girl. For families with five children, what is the probability that all the children are girls?

A.

B. one of these answers

C.

D.

E.

View answer

Correct Answer: E

Question #246

Standard III (E) - Responsibilities of Supervisors points out that when violations do occur, ________ procedures may be inadequate.

A. ompliance

B. one of these answers

C. egal

D. iduciary duty

View answer

Correct Answer: A

Question #247

When merchandise inventory is purchased under a perpetual system, which account is debited?

A. ash

B. erchandise Inventory

C. ccounts Payable

D. urchases

View answer

Correct Answer: B

Question #248

Julia Chen, a portfolio manager for U.S.-based Dane Investments, has just established a short position in Swiss franc currency futures as part of a currency overlay strategy. The position consists of 100,000 contracts with an initial margin of $4,000, a maintenance margin of $2,500, and a contract price of 0.9120 USD/CHF. If the futures price on the subsequent two days is 0.9300, and 0.8928, respectively, what will be her margin account balance at the end of the second day?

A. 4,000

B. 6,200

C. 7,720

View answer

Correct Answer: B

Question #249

Tessmer is a hard-working employee working in the sales department of a large bank. In this capacity, Tessmer is allowed to have an expense account to be used to entertain clients and cover business expenses. Over the past 3 months, Tessmer's expenses have almost doubled, a large part coming from expenses attributed to "business expense." While his manager, Janus Lace, is suspicious about this and believes that Tessmer is using the account for personal expenses, he has no proof of this. All of Tessmer's rei

A. iolated the AIMR standard on Professional Misrepresentation

B. iolated the AIMR standard on Reasonable Costs

C. ot violated any AIMR standard

D. iolated the AIMR standard on Professional Misconduct

View answer

Correct Answer: C

Question #250

An AIMR member:

A. ust report any criminal activity to the appropriate legal or regulatory authority

B. , II, III and IV

C. I and IV only

D. , II and IV only

E. I, III and IV only

View answer

Correct Answer: B

Question #251

Which of the following methods is the best way of conducting a comparative financial statement analysis?

A. omparing of a company's balance sheet to its income statement

B. ll of these methods are equally good

C. reak-even analysis

D. n index-number trend series analysis

E. cash flow forecast

View answer

Correct Answer: D

Question #252

If an overstatement of depreciation by 100 and an understatement of accounts receivables by 40 causes a firm's net income to be understated by 70, the firm's tax rate is ________.

A. 5%

B. 0%

C. 0%

D. 0%

View answer

Correct Answer: D

Question #253

The accumulated depreciation account should show:

A. otal depreciation for fixed assets since the business was formed

B. nly the depreciation expense recognized during the current year

C. otal depreciation for fixed assets still in use

D. urrent depreciation expense plus estimated depreciation for next year

View answer

Correct Answer: C

Question #254

________ accounting is mandatory for fixed-income securities.

A. lexible

B. isky

C. otal

D. qual

E. ccrual

View answer

Correct Answer: E

Question #255

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

A. 19,423

B. 215,024

C. 23,682

D. 33,943

E. 53,512

View answer

Correct Answer: D

Question #256

Parts of the standards that are ________ must be observed.

A. estraining

B. andatory

C. ecommended

D. uggested

E. nhibiting

View answer

Correct Answer: B

Question #257

At a local burger joint, 3 workers receive $5.3 per hour, 4 workers receive $4.9 per hour and 2 workers receive $8.1 per hour. The average pay of a worker at the joint is ________.

A. 5

B. one of these answers

C. 5

D. 6

View answer

Correct Answer: C

Question #258

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

A. xpenses are recognized as services are used

B. & III

C. , II, III & IV

D. , II & IV

E. I, III & IV

View answer

Correct Answer: C

Question #259

Smithers is a financial analyst with XYZ Brokerage Company. She is preparing a purchase recommendation on JNI Corporation. Which of the following situations would represent a conflict of interest for Smithers and, therefore, would have to be disclosed?

A. mithers is on a retainer as a consultant to JNI

B. I and III only

C. , II and III only

D. I only

E. and IV only

View answer

Correct Answer: B

Question #260

The joint probability of events A and B occurring equals 0.11. The probability of neither A nor B occurring equals 0.64. If P(A) equals 0.24, the probability of B occurring equals ________.

A.

B.

C.

D.

View answer

Correct Answer: D

Question #261

Over a given year, a firm's total assets increased by $7,000 and total liabilities decreased by $4,000. If the firm did not issue any new equity and paid out $1,500 in dividends, then its net income during the year was ________.

A. 1,500

B. 9,500

C. 4,500

D. 12,500

View answer

Correct Answer: D

Question #262

The loss from an uncollectible account is

A. n asset

B. regular expense of doing business

C. liability

D. reduction in revenue

View answer

Correct Answer: B

Question #263

If the Central Bank wishes to diminish unemployment, it would attempt to ________ the money supply by ________ short-term interest rates.

A. ecrease, increasing

B. tabilize, decreasing

C. tabilize, increasing

D. ncrease, decreasing

E. ncrease, increasing

View answer

Correct Answer: D

Question #264

Firms A and B are identical. In one year, Firm A's statements have the beginning inventory understated and the ending inventory overstated. Then,

A. 's tax payment is higher

B. & IV

C. I & III

D. & III

E. I & IV

View answer

Correct Answer: A

Question #265

What quarterly payment is required beginning one period from today to pay off a $4,000 debt, if interest accrues at 8% per year, compounded quarterly, and the debt is to be retired in 5 years?

A. 1,001

B. 244

C. 848

D. 407

E. 214

View answer

Correct Answer: B

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