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

Question #1

An AIMR member who lives in Atlantis, where some laws are stricter than the AIMR Code of Ethics and others are less strict, should follow:

A. tlantis' laws, since the member resides in Atlantis

B. combination of the two which results in a stricter set of laws

C. IMR code, since the code is a strict set of rules

D. ot clear from the information provided

View answer

Correct Answer: B

Question #2

What is the present value of $50 per year for 10 years, with the first cash flow occurring today, rather than 1 year from now? Assume interest is 6% per year, compounded annually.

A. 368

B. 402

C. 390

D. 357

E. 398

View answer

Correct Answer: C

Question #3

Which of the following AIMR Standards states that the financial analyst must use reasonable judgment as to the inclusion of relevant factors in research reports?

A. II (C

B. II A

C. II D

D. V (A

View answer

Correct Answer: D

Question #4

Which of the following is a false statement?

A. PI is calculated using a market basket of consumer goods

B. PI is a broad measure of prices throughout the economy

C. he GDP deflator is used to calculate real GDP from nominal GDP

D. oth CPI and the GDP deflator suffer from substitution bias

E. he CPI and the GDP deflator tend to move in the same direction

View answer

Correct Answer: B

Question #5

The simple or linear annualized short-term interest rate is calculated according to:

A. ultiply the annual rate by the length of the period in months

B. ivide the annual rate by the length of the period in months

C. ultiply the annual rate by the length of the period, as a proportion of a year

D. ultiply the annual rate by the length of the period as a percentage of six months

E. ivide the annual rate by the length of the period as a proportion of the year

View answer

Correct Answer: C

Question #6

A stock had the following percentage increases in its value over the last 5 years: 7%, 4%, 12%, 10%, 15%. The geometric rate of return on the stock equals ________.

A.

B.

C.

D.

View answer

Correct Answer: D

Question #7

The mean amount of gasoline and services charged by Key Refining Company credit customers is $70 per month. The distribution of amounts spent is approximately normal with a standard deviation of $10. What is the probability of selecting a credit card customer at random and finding the customer charged between $70 and $83?

A.

B. one of these answers

C.

D.

E.

View answer

Correct Answer: A

Question #8

The consumer price index (CPI) is calculated

A. sing a fixed basket of goods and will tend to understate inflation

B. sing a constantly changing basket of goods and will tend to understate inflation

C. sing a constantly changing basket of goods and will tend to overstate inflation

D. sing a fixed basket of goods and will tend to overstate inflation

View answer

Correct Answer: D

Question #9

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

A. ov(X,Y)/[(sigma_X)*(sigma_Y)]^2

B. Cov(X,Y)]^0

C. sigma_X)*(sigma_Y)/Cov(X,Y)

D. ov(X,Y)/[(sigma_X)*(sigma_Y)]

View answer

Correct Answer: D

Question #10

In a common size statement, a firm shows average receivables of 9.3%. Its receivables turnover equals 1.23.What's the average receivables collection period?

A. 96

B. nsufficient information

C. 21

D. 84

View answer

Correct Answer: A

Question #11

Pamela Burke is a cotton farmer in Texas. Her crop will be ready for harvest in three months, but Burke does not believe prices will remain at their current level. Burke contacts Brooke Anderson, a derivatives dealer, to negotiate a forward contract. Anderson agrees to be the counter party to a forward contract that will eliminate Burke's exposure to the price of cotton. The contract is structured as a nondeliverable forward with a contract price of S47. If the price of cotton is $49 in three months, which

A. urke will be exposed to greater credit risk, and Anderson will make a payment

B. nderson will be exposed to greater credit risk, and Burke will make a payment

C. urke will be exposed to greater credit risk, and Burke will make a payment

View answer

Correct Answer: B

Question #12

Which of the following is not a current liability?

A. otes Payable

B. ages Payable

C. llowance for Uncollectible Accounts

D. nearned Revenue

View answer

Correct Answer: C

Question #13

Which of the following is/are true about the PPS?

A. ccounts of clients that are not currently under the firm's management should not be included in the presentation of the historical performance results

B. II only

C. only

D. and III only

E. I only

View answer

Correct Answer: D

Question #14

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

A. 100

B. 145

C. 110

D. 115

E. 105

View answer

Correct Answer: D

Question #15

During an economic boom, the AD-AS model indicates that

A. oth the real interest rate and real wage rates will decline

B. eal interest rate will decline and real wage rates will rise

C. eal interest rate will rise and real wage rates will decline

D. oth the real interest rate and real wage rates will increase

E. eal wage rates will remain constant while the real interest rate will rise

View answer

Correct Answer: D

Question #16

Sid Barnes is the senior most partner with Noble & Noble, a well-known brokerage firm. Bruce Lohmann is a senior partner who reports to Barnes. Lohmann is an AIMR member while Barnes is not. Recently, N&N's research department identified a sterling investment opportunity and Barnes decided to allow some of the largest discretionary accounts to benefit from this first. He directed Lohmann to take the appropriate steps and in turn, Lohmann assigned Doug Jardine, a senior analyst, to complete the portfolio reb

A. arnes has violated the AIMR code

B. , II and III

C. I only

D. and III only

E. I and III only

View answer

Correct Answer: B

Question #17

How long will it take money to double at 9.5% per year, compounded annually?

A. 8

B.

C. 0

D.

E.

View answer

Correct Answer: D

Question #18

Which of the following is /are true?

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

B. , II & III

C. only

D. I only

E. II only

View answer

Correct Answer: C

Question #19

Calculate the book value per share of General Industries common stock, given the following information. Par value of common stock, $1 per share; total assets, $12,565,000; retained earnings, $5,550,000; total liabilities, $5,012,500; number of common shares outstanding, 475,000; number of preferred shares outstanding, 0.Market value of common stock, $96.25.

A. 26

B. 96

C. one of these answers

D. 15

E. 10

View answer

Correct Answer: D

Question #20

The monthly compounded rate is 4% quoted on an annualized basis. The equivalent semiannually compounded rate is:

A.

B.

C.

D.

View answer

Correct Answer: B

Question #21

Which of the following is/are true about depreciation?

A. epreciation allocates non-cash expenses to period in which long-lived assets are used

B. only

C. II only

D. & III

E. , II & III

View answer

Correct Answer: C

Question #22

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

A. current liability until the first purchase occurs

B. footnote disclosure

C. one of these answers

D. long-term liability

View answer

Correct Answer: B

Question #23

What is your monthly payment, beginning next month, on a $15,000 loan, if you pay it off over 48 months and the interest rate is 2.9% per year, compounded monthly?

A. 582

B. 3,772

C. 331

D. 324

E. 306

View answer

Correct Answer: C

Question #24

Standard III (A) states that members notify their ________ of the Code and Standards. This notification must bedone ________.

A. earest Society secretary; within 45 days of candidacy

B. mmediate supervisor; in writing

C. earest Society secretary; orally or in writing

D. hief operating officer (or equivalent); in writing

E. hief operating officer (or equivalent); orally or in writing

View answer

Correct Answer: B

Question #25

Which of the following statements is the best description of the ability of arbitrageurs to correct market anomalies?

A. nly the more significant mispricing may be exploited while others are allowed to persist

B. here is a high degree of reliability that apparent mispricing will be corrected

C. nvestors supply largely unlimited amounts of capital to arbitrageurs because of the reliability of the returns

View answer

Correct Answer: A

Question #26

Mathematically, the marginal propensity to consume is

A. ncome divided by consumption

B. dditional consumption divided by additional income

C. onsumption divided by income

D. dditional income divided by additional consumption

View answer

Correct Answer: B

Question #27

Purchases of marketable securities are:

A. perating cash flows

B. nvesting cash flows

C. inancing cash flows

D. ither financing cash flows or investing cash flows

View answer

Correct Answer: B

Question #28

Which of the following is/are revenue recognition methods?

A. ost Recovery MethodII

B. I, III & IV

C. & II

D. , II & III

E. II & IV

View answer

Correct Answer: B

Question #29

Keynesians believe that a discretionary fiscal policy:

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

B. s ineffective since people rationally anticipate its future effects

C. one of these answers

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

View answer

Correct Answer: C

Question #30

Which of the following is the least accurate statement about the price-to-sales multiple?

A. rice-to-sales is a poor valuation technique for growth companies

B. ales growth drives all subsequent earnings and cash flows

C. evenue has minimal accounting manipulation concerns relative to other numbers

View answer

Correct Answer: A

Question #31

A bell-shaped, symmetrical frequency distribution has a mean of 50. If 68% of the observations in the distribution fall between 40 and 60, what's the range within which 99% of the observations in the distribution fall?

A. 19

B. 23

C. 30; 70]

D. 24

View answer

Correct Answer: D

Question #32

The ROE equals:

A. rofit margin times equity turnover

B. one of these answers

C. I & III

D. & II

E. , II & III

View answer

Correct Answer: C

Question #33

You are faced with a counting problem in which the number of outcomes is infinite. The counting method you should use is:

A. he multinomial formula

B. he multiplication rule

C. he binomial formula

D. one of these answers is correct

View answer

Correct Answer: D

Question #34

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

A. roceeds from selling investments in the debt securities of other entities, except cash equivalents

B. ll responses are correct

C. roceeds from collecting the principal amount of loans

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

View answer

Correct Answer: B

Question #35

Which of the following AIMR Standards states that referral fees must be disclosed in writing to clients or customers?

A.

B. I (A)

C. V (B

D. V

View answer

Correct Answer: C

Question #36

Argus is a large-accounts money manager with a high-profile hedge fund. He manages all his accounts in a very efficient manner and all his clients are satisfied with his performance. Argus has one character flaw, though. He is given to making sexually inappropriate comments in mixed company, touching female employees in inappropriate ways and cracking adult jokes loudly. This makes many of the other employees uncomfortable in his presence. Argus

A. one of these answers

B. as violated AIMR standard on professional incompetence

C. as violated AIMR standard on professional conduct

D. as not violated any AIMR standard since he has kept his clients satisfied and the professional misbehavior is an internal matter to be handled by his superiors

View answer

Correct Answer: C

Question #37

Country A's workforce consists in large part of seasoned workers, with an average age of around 45. Country B is relatively young, with an average workforce age of just 31. A is also a mature country, having implemented many modern advances in technology. B is a growing country with a dynamic leadership which is bringing about a technological revolution in the country. Given this, country A has ________ structural unemployment and ________ frictional unemployment than country B.

A. ower, lower

B. igher, lower

C. ower, higher

D. igher, higher

View answer

Correct Answer: D

Question #38

Which of the following is/are current liabilities?

A. ccounts receivableII

B. I, III & IV

C. I & III

D. II & IV

E. , II, III & IV

View answer

Correct Answer: A

Question #39

Under GAAP, which of the following costs can be capitalized?

A. rilling costs for oil wells

B. ublic relations expense to develop goodwill

C. esearch and development

D. one of these answers

View answer

Correct Answer: A

Question #40

If two events A and B are mutually exclusive, what does the special rule of addition state?

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

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

C. one of these answers

D. (A or B) = P(A) - P(B)

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

View answer

Correct Answer: E

Question #41

Sue Wie, CFA, is the chief financial officer for Garth Company. The company will need to borrow S75 million in the near future to fund a plant expansion. Wie expects interest rates will rise and decides to hedge against this risk using a 3 * 6 LIBOR based forward rate agreement (FRA). The underlying rate for this FRA is:

A. 0-day LIBOR

B. 0-day LIBOR

C. 80-day LIBOR

View answer

Correct Answer: B

Question #42

On a statement of cash flows that uses the indirect approach, calculation of cash flow from operations treats depreciation as an adjustment to reported net income because

A. epreciation is a direct source of cash

B. epreciation is an outflow of cash to a reserve account for the replacement of assets

C. epreciation reduces net income but does not involve an outflow of cash

D. epreciation reduces net income and involves an outflow of cash

View answer

Correct Answer: C

Question #43

Standard III includes which of the following ?

A. easonable Basis and Representations

B. ll of these answers

C. erformance Presentation

D. se of Professional Designation

E. one of these answers

View answer

Correct Answer: F

Question #44

What is the chart called when the paired date (the dependent and independent variables) are plotted?

A. inear regression

B. ie

C. ar

D. otted-Swiss

E. one of these answers

View answer

Correct Answer: E

Question #45

A discrete probability distribution is the same as:

A. collection of all possible outcomes of an experiment

B. n absolute frequency distribution

C. relative frequency distribution

D. one of these answers

View answer

Correct Answer: C

Question #46

What is the proportion of the total area under the normal curve within plus and minus two standard deviation?

A. 8%

B. 5%

C. 9

D. one of these answers are correct

E. 4%

View answer

Correct Answer: B

Question #47

The primary cause of frictional unemployment is

A. he presence of legislated high minimum wages that price unskilled workers out of the market

B. iscouraged workers who quit looking for a job after extended periods of unsuccessful job search

C. naccurate and costly information about job opportunities

D. igh unemployment benefits that reduce the incentive of unemployed workers to search for employment

View answer

Correct Answer: C

Question #48

The bonds of Joslin Corp. are currently callable at par value. The bonds mature in eight years and have a coupon of 8%. The yield on the Joslin bonds is 175 basis points over 8-year U.S. Treasury securities, and the Treasury spot yield curve has a normal, rising shape. As yields on bonds comparable to the Joslin bonds decrease, the Joslin bonds will most likely exhibit:

A. egative convexity

B. ncreasing modified duration

C. ncreasing effective duration

View answer

Correct Answer: A

Question #49

PRC International just completed a S234 million floating rate convertible bond offering. As stated in the indenture, the interest rate on the bond is the lesser of 90-day LIBOR or 10%. The indenture also requires PRC to retire $5.6 million per year with the option to retire as much as $10 million. Which of the following embedded options is most likely to benefit the investor? The:

A. 0% cap on the floating interest rate

B. ccelerated sinking fund provision for principal repayment

C. onversion option on the convertible bonds

View answer

Correct Answer: C

Question #50

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

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

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

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

View answer

Correct Answer: A

Question #51

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

A. ,445

B. ,345

C. ,122

D. ,145

View answer

Correct Answer: C

Question #52

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

A. 1,077

B. 1,056

C. 589

D. 1,134

E. 981

View answer

Correct Answer: B

Question #53

Omega Prime Securities is a sizable investment bank that undertakes security issuances on behalf of small and medium-size businesses. Treffil Ellis is the senior vice president of corporate finance at Omega. Treffil, on one of his golf junkets, made acquaintance with Tralth Trevor, owner of a growing chain of resort hotels. Tralth invites Treffil to his estate mansion the next day and over drinks, asks him how fast Omega could issue equity- linked callable notes to finance the $200 million construction of n

A. iolated Standard IV (B

B. II and IV only

C. and III only

D. II only

E. I only

View answer

Correct Answer: C

Question #54

Which of the following is true about Standard III (B) - Duty to Employer?

A. t prohibits a departing employee from making arrangements to enter independent practice prior to leaving current employment

B. t precludes a member from entering into an independent business that is in direct competition with the employer

C. t requires the employee to obtain written permission from the employer as well as the outside entity before entering independent practice

D. t requires departing employee to give all the details about the independent practice before leaving the current employment

View answer

Correct Answer: C

Question #55

Which of the following is/are true about the Central Limit Theorem?

A. t cannot be applied if the population distribution is non-normal

B. I only

C. only

D. & III

E. II only

View answer

Correct Answer: D

Question #56

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

A. n increase in output and a lower price level

B. decrease in output and a higher price level

C. n increase in output while prices remain unchanged

D. decrease in output and a lower price level

View answer

Correct Answer: D

Question #57

The following is true about the price earnings ratio

A. ll of these answers are correct

B. he ratio is calculated based on the expected earnings per share for the next period

C. tocks have low PE ratios if they are less than five to eight and are considered underpriced

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

View answer

Correct Answer: A

Question #58

Sparten, Inc., a plumbing contractor, received a check for $3,000 on June 30 for services to be performed in the following fiscal month. During the July accounting period, Sparten completed all but $500 of the job. What adjusting entry needs to be made at the end of July?

A. ncrease Cash and Revenue for $3,000

B. ecrease Accounts Receivable and increase Revenue for $2,500

C. ncrease Unearned Revenue and decrease Cash for $500

D. ebit Unearned Revenue and credit Revenue for $2,500

View answer

Correct Answer: D

Question #59

Maria Reyes, CFA, recently purchased a 10 year floating rate bond which is reset semiannually. The bond's coupon is based on the six-month Treasury rate plus 200 basis points with a cap of 8.50%. Identify the TRUE statement regarding these floating rate bonds.

A. he maximum coupon rate on these bonds would occur when the six-month Treasury bill was at 8

B. hese floating rate bonds have more interest rate risk than comparable floating rate bonds that reset annually

C. f the six-month Treasury rate has been greater than 7

View answer

Correct Answer: C

Question #60

The rate of unemployment is equal to:

A. he number of unemployed people as a fraction of the total labor force

B. he number of unemployed people as a fraction of the total population

C. one of these answers

D. he number of unemployed people as a fraction of the total population eligible to work

View answer

Correct Answer: D

Question #61

If you deposit $400 a month, beginning next month, for 10 years into an account paying 8% per year, compounded monthly, how much is in your account after that last deposit?

A. 18,121,973

B. 73,178

C. 48,000

D. 13,091

E. 88,402

View answer

Correct Answer: B

Question #62

A positively skewed distribution:

A. as fat tails

B. s skewed to the right

C. as a large variance

D. s skewed to the left

View answer

Correct Answer: B

Question #63

Richard Eisenberg, a quantitative analyst with Middle Road Brokerage, has been instructed to perform a statistical analysis to determine the relationship between the volatility of smaller-cap stocks and the quarterly performance of a series of smaller-cap mutual funds. Mr. Eisenberg begins his assignment by formulating and stating a hypothesis. Next, he identifies the appropriate test statistic and the probability distribution for the series. Mr. Eisenberg then progresses to specifying the significance leve

A. valuating the goodness of fit

B. ollecting the data and performing the calculations

C. etermining the p-value

D. one of these answers is correct

E. tating the decision rule

View answer

Correct Answer: E

Question #64

You are given a risk-free rate of 3% per year, a portfolio return of 8% per year, and a standard deviation of portfolio return of 22% per year. What is the Sharpe measure of risk-adjusted performance?

A.

B.

C.

D.

View answer

Correct Answer: C

Question #65

A Japanese auto company announces a new plant to be constructed in San Antonio, Texas. The company will partly finance the project with a dual currency bond offering. The $200 million offering will have a 6.0% couponpayable in yen and mature in 2021 with the final principal payment in U.S. dollars. Indicate whether a U.S.- based investor and/or the company will assume any potential currency exchange risk related to these bonds.

A. nvestor only

B. ssuer only

C. oth the issuer and the investor

View answer

Correct Answer: C

Question #66

A firm with a simple capital structure had a net income of 7,700 last year. It had 1,000 common shares outstanding and its reported EPS was 6.6. What was the firm's payment to its preferred stock holders?

A. ,300

B. 00

C. ,100

D. ,200

View answer

Correct Answer: C

Question #67

The disclosures for retroactive compliance apply to composites formulated prior to ________.

A. anuary, 1989

B. anuary, 1992

C. anuary, 1991

D. anuary, 1993

E. anuary, 1990

View answer

Correct Answer: D

Question #68

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

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

B. end to reduce the money supply

C. end to increase the money supply

D. ave no effect on the money supply

View answer

Correct Answer: B

Question #69

In an investment environment, an initial outlay of $100 grows to $156 in 7 years. The quarterly compounded rate of annual interest implicit in this is:

A.

B.

C.

D.

View answer

Correct Answer: B

Question #70

A buy side analyst is discussing the relative functionality of the Australian stock market with her colleagues. She states three specific attributes of the Australian stock market that infer that the market is a well-functioning securities market. She says, 'The Australian stock market is characterized by (1) rapid adjustment of prices to reflect new information, and (2) price continuity in the absence of significant new information." Are these accurate descriptions of attributes of a well functioning marke

A. oth descriptions are accurate

B. either description is accurate

C. nly one of these descriptions is accurate

View answer

Correct Answer: A

Question #71

On January 1, 1992, Carter Inc. purchased equipment having an estimated salvage value equal to 20% of its original cost at the end of a 10 year life. The equipment was sold December 31, 1996 for 50% of itsoriginal cost. If the equipment's disposition resulted in a reported loss, which of the following depreciation methods did Carter use?

A. traight-line

B. ouble-declining-balance

C. omposite

D. um-of-the-years'-digits

E. ccelerated

View answer

Correct Answer: A

Question #72

Affirmative action commitments by industrial organizations have led to an increase in the number of women in executive positions. Satellite Office Systems has vacancies for two executives, which it will fill from among four women and six men. What is the probability that two woman are selected?

A. /5

B. /15

C. /4

D. /15

E. one of these answers

View answer

Correct Answer: D

Question #73

A manager who pays a higher commission than would normally be paid to purchase the goods or services:

A. ay be violating the fiduciary duties owed to the client

B. one of these answers

C. s violating the fiduciary duties owed to the client

D. s not violating the fiduciary duties owed to the client

View answer

Correct Answer: C

Question #74

Felix Asterix is a shrewd industry analyst working for Obelix, Inc., a brokerage firm of some repute. Asterix had invested about $50,000 in a few stocks trading on the Australian exchange a year ago. Obelix itself is not active outside the US and Asterix's transactions do not represent any violations of the company policies. One of the Australian firms whose shares Asterix holds recently applied for a dual listing on the NYSE and will begin trading in the US in a month. Asterix has advised in his recent res

A. ot violated the AIMR standard since his transactions took place long before the dual listing and he is not obligated to reveal his personal holdings

B. only

C. I and III only

D. I and IV only

E. I, III and IV only

View answer

Correct Answer: D

Question #75

When an analyst reaches conclusions about a firm's impending announcements before the actual release of information, using non-material, non-public information in conjunction with public information, insider trading charges cannot be leveled against her. This arises from a legal defense against insider trading charges knownas:

A. he Shingles Theory

B. he question is based on false premise

C. he Insider Legal Statute

D. he Mosaic Theory

View answer

Correct Answer: D

Question #76

You are examining a group of 6 companies. Their average profit margins have been 49%, 10%, 5%, 35%, 30%, and 30%. What is the range of profit margins?

A. 9

B. 0

C. 4

D.

View answer

Correct Answer: C

Question #77

At the end of an accounting period, each expense that has been incurred but not yet paid should be recorded as ________.

A. closing entry

B. n opening entry

C. n adjusting entry

D. reversing entry

View answer

Correct Answer: C

Question #78

A tax levied on imported goods is called a(n)

A. xcise tax

B. oreign profits tax

C. ariff

D. uota

View answer

Correct Answer: C

Question #79

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

A. he Investment Company Act

B. he Congressional Investor's Protection Act

C. he U

D. he U

View answer

Correct Answer: C

Question #80

Ward is scheduled to visit the corporate headquarters of Evans Industries. Ward expects to use the information obtained to complete his research report on Evans stock. Ward learns that Evans plans to pay all of Ward's expenses for the trip, including the cost of meals, hotel room and air transportation. Which of the following actions would be the best course for Ward to take under the Code and Standards?

A. ccept the expense-paid trip and write an objective report

B. rite the report without taking the trip

C. ay for all travel expenses, including costs of meals and incidental items

D. ccept the expense paid trip but disclose the value of the services accepted in the report

View answer

Correct Answer: C

Question #81

Which of the following determine(s) the demand curve for a good?

A. isposable income

B. & III

C. , III & IV

D. , II & III

E. I only

View answer

Correct Answer: B

Question #82

Which of the following best describes a statement of shareholders equity?

A. statement of shareholders equity measures a company's financial performance over a specified period of time

B. statement of shareholders equity 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. statement of shareholders equity reports changes over a period of time in component accounts that comprise the ownership of a firm

E. statement of shareholders equity summarizes the financial position of a company at a given point in time

View answer

Correct Answer: D

Question #83

The contents of the section of the annual report entitled "Management's Discussion and Analysis" (MD&A) are

A. andated by regulations of the SEC

B. andated by pronouncements of the Financial Accounting Standards Board (FASB)

C. eviewed by independent auditors

D. andated by regulations of the Internal Revenue Service

E. one of these answers

View answer

Correct Answer: A

Question #84

The XYZ Company operates a catering service specializing in business luncheons for large businesses. XYZ requires customers to place their orders two weeks in advance of the scheduled events. XYZ bills its customers on the tenth day of the month following the date of service and requires that payment be made within 30 days of the billing date. Conceptually, XYZ should recognize revenue from its catering services at the date when a ________.

A. illing is mailed

B. ustomer's payment is received

C. ustomer places an order

D. uncheon is served

E. one of these answers

View answer

Correct Answer: D

Question #85

The accumulated amount by which a plant asset has been depreciated over its useful life is classified as

A. liability

B. n asset

C. n expense

D. evenue

View answer

Correct Answer: B

Question #86

Firms with records or performance calculations for periods prior to the applicable effective date(s) that are not in conformance with the AIMR Performance Presentation Standards can still claim compliance with the standards if certain conditions are met. Which of the following is an option available to such a firm?

A. one of these answers are options available to such a firm

B. ll of these answers are options available to such a firm

C. he firm can restate its historical performance in accordance with the Relaxed Retroactive Standards for retroactive compliance

D. he firm can use its nonconforming historical performance and disclose specifically when and how the performance is not in compliance

E. he firm can restate its historical performance numbers in accordance with the Standards

View answer

Correct Answer: B

Question #87

A perpetuity pays $1,000 a year. You have a discount rate of 10% per year. If you are indifferent between buying this perpetuity and a 7-year annuity, how much does the annuity pay per year?

A. 2,054

B. 3,199

C. 1,867

D. 1,429

View answer

Correct Answer: A

Question #88

Calculate the book value per share of Quality, Inc.'s common stock, given the following information. Par value of common stock, $2.5 per share; total assets, $19,100,000; retained earnings, $7,375,000; total liabilities, $6,975,000; number of common shares outstanding, 1,250,000; number of preferred sharesoutstanding, 15,000 at $100 par value. Market value of common stock, $24.25. Market value of preferred stock, $106.50.

A. 8

B. 15

C. 3

D. 9

E. one of these answers

View answer

Correct Answer: A

Question #89

Which of the following is/are forms of plagiarism as defined by AIMR code of conduct?

A. sing material from a seminar in research reports without proper acknowledgment

B. , II and IV only

C. , II and III only

D. I, III and IV only

E. I and III only

View answer

Correct Answer: B

Question #90

The mean gross annual income of certified tack welders are normally distributed with the mean of $20,000 and a standard deviation of $2,000. The ship building association wishes to find out whether their tack welders earn more or less than $20,000 annually. The alternate hypothesis is that the mean is not $20,000. The 0.10 level of significance is to be used. What is the decision rule?

A. o not reject the null hypothesis if computed z lies between -1

B. one of these answers

C. eject the null hypothesis if computed z is below -1

D. o not reject the null hypothesis if computed z lies greater than 1

E. o no reject the null hypothesis if computed z lies between -1

View answer

Correct Answer: E

Question #91

Which of the following is/are true?

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

B. & IV

C. , II, III & IV

D. , II & III

E. I, III & IV

View answer

Correct Answer: B

Question #92

Six-month LIBOR is an interest rate which:

A. epresents the interest rate paid on a CD that matures in 6 months

B. s the return available on the shortest term euro-denominated securities

C. s determined by adding a small spread to the yield available on a UK government bond maturing in 6 months

View answer

Correct Answer: A

Question #93

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

A. one of these answers

B. lients and Prospects

C. IMR

D. upervisors

E. he Employer

View answer

Correct Answer: B

Question #94

Members can comply with Standard IV (

A. ) by undertaking the following:

A. nalyzing basic investment characteristicsII

B. , II & IV

C. I & IV

D. & IV

E. & II

View answer

Correct Answer: A

Question #95

An experiment involves selecting a random sample of 256 middle managers at random for study. One item of interest is their mean annual income. The sample mean is computed to be $35,420 and the sample standard deviation is $2,050. What is the point estimate?

A. 138

B. one of these answers

C. 2,050

D. 34,520

E. 35,420

View answer

Correct Answer: E

Question #96

What is the present value today of these annual cash flows: $5,000, $4,000, $3,000, $2,000, $1,000? Assume the first cash flow occurs 1 year from today and an interest rate of 8% per year, compounded annually.

A. 12,854

B. 15,000

C. 13,598

D. 12,591

E. 5,000

View answer

Correct Answer: D

Question #97

Suppose the least squares regression equation is Y' = 1202 + 1,133X. When X=3, what does Y' equal?

A. one of these answers

B. ,734

C. ,601

D. ,000

E. ,050

View answer

Correct Answer: C

Question #98

What is the present value of $250 per year for 6 years, with the first cash flow occurring today, rather than 1 year from now? Assume interest is 7% per year, compounded annually.

A. 1,209

B. 1,500

C. 1,191

D. 1,275

E. 1,293

View answer

Correct Answer: D

Question #99

A national manufacturer of unattached garages discovered that the distribution of the lengths of time it takes two construction workers to erect the Red Barn model is approximately normally distributed with a mean of 32 hours and a standard deviation of 2 hours. What percent of the garages take between 32 and 34 hours to erect?

A. 6

B. one of these answers

C. 6

D. 4

E.

View answer

Correct Answer: D

Question #100

The primary current source of generally accepted accounting principles rests with the ________.

A. ecurities and Exchange Commission

B. nstitute of Management Accountants

C. merican Institute of Certified Public Accountants

D. ew York Stock Exchange

E. inancial Accounting Standards Board

View answer

Correct Answer: E

Question #101

What is the effective date for compliance with the AIMR-Performance Presentation Standards for including accrued income in market value performance calculations?

A. anuary 1, 1997

B. anuary 1, 1993

C. uly 1, 1995

D. anuary 1, 1992

View answer

Correct Answer: A

Question #102

The current account trade balance + the capital account trade balance =

A. he currency balance at the World Bank

B. DP

C. he foreign exchange rate

D. NP

E. he trade deficit/surplus

View answer

Correct Answer: F

Question #103

If the beginning inventory is overstated and the ending inventory is understated, which of the following is/are true:

A. OGS is understatedII

B. & III

C. V only

D. I only

E. I & IV

View answer

Correct Answer: D

Question #104

Which measure of central tendency is used to determine the average annual percent increase?

A. ode

B. ean

C. eighted mean

D. edian

E. eometric mean

View answer

Correct Answer: E

Question #105

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

A. eject the alternative hypothesis

B. eject the null hypothesis

C. ail to reject the null hypothesis

D. ccept the null hypothesis

View answer

Correct Answer: B

Question #106

An investor holds a long position in a futures contract on the S&P 500 Index. The futures contract has a term of three months, requires 10% margin, and has a futures price of 1,574. The investor posted $37,500 into the margin account at contract initiation. After the contract initiation, the futures price on the index experienced infrequent but dramatic drops. Two days ago, the investor received a margin call and was required to post an additional $17,500 to the margin account. Which of the following is mos

A. 17,500

B. 18,750

C. 22,500

View answer

Correct Answer: C

Question #107

The "Treasury Stock" method of calculating EPS involves:

A. onsidering call option exercise when the average stock price is below strike price

B. onsidering call option exercise when the average stock price is above the strike price

C. sing options as stock equivalents only if they are anti-dilutive

D. onsidering repurchase of shares at the highest market price

View answer

Correct Answer: B

Question #108

A firm has to pay 1,000 to its suppliers in one year. The interest rate on this liability is 9%. The current liability recorded by the firm is ________.

A. ,090

B. 0

C. ,000

D. 17

View answer

Correct Answer: C

Question #109

What value does the null hypothesis make a claim about?

A. one of these answers

B. opulation parameter

C. ample mean

D. ype II error

E. ample statistic

View answer

Correct Answer: B

Question #110

On a certain date, the banking system had $2 billion in excess reserves. The legally required reserve ratio was 12.5 percent. Potentially, the banking system as a whole could increase its loans a maximum of

A. ore than $25 billion

B. 2 billion

C. 12

D. 16 billion

View answer

Correct Answer: D

Question #111

An economic researcher publishes evidence that the consensus inflation estimation for the following year has no correlation with the actual inflation level the year before. The estimation error is often very large, but does not display a pattern. Which of the following theories would this evidence support?

A. ational ignorance

B. ean reversion

C. eteroskedasticity

D. onetarist theory

E. ational expectations hypothesis

View answer

Correct Answer: E

Question #112

The GDP measures:

A. he total value of all goods, services and financial transactions during a period

B. he total value of all the earnings in the economy

C. he total value of all goods and services produced in the economy during a period

D. he total value of all final goods and services produced in the economy during a period

View answer

Correct Answer: D

Question #113

What simple annual interest rate would cause a $200 deposit to earn $15 interest in one year?

A.

B. 2

C. 0

D.

E.

View answer

Correct Answer: D

Question #114

The Management Discussion and Analysis Section of the annual report ________.

A. s optional but normally included in the annual report

B. s required by the SEC only if the company has suffered from unfavorable trends or there are significant uncertainty concerning liquidity of the company

C. s required by the SEC only if they have a qualified audit opinion

D. s required by the SEC

View answer

Correct Answer: D

Question #115

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

A. imultaneous dissemination

B. stablish procedures for determining material change

C. isclose levels of service

D. ublish personnel guidelines for predissemination

E. imit the number of people involved

View answer

Correct Answer: F

Question #116

For accounting purposes, which of the following is/are TRUE about assets?

A. ssets are future benefits whose values are known today

B. , II, III & IV

C. , II & IV

D. I only

E. & II

View answer

Correct Answer: C

Question #117

Anamese Barrytone is a broker with Caledonia Investments. Caledonia also provides investment recommendations through its weekly letter. In its last letter released 3 days ago, Caledonia changed its investment recommendation on Sell-Me-Now, Inc. from "hold" to "sell." Anamese has just received a call from Sloan who wants to place a market-buy order on 600 shares of Sell-Me-Now. Anamese should

A. ot execute the order since her firm has placed the stock on the sell list

B. nform her supervisor about the order and then decide if the order should be executed

C. xecute the order as is without trying to change Sloan's mind by telling him about Caledonia's recommendation since she is required to be a neutral broker by SEC rules

D. nform Sloan about the change in Caledonia's recommendation before executing the order

View answer

Correct Answer: D

Question #118

Standard IV (

A. ) relates to two major components, Independence and Objectivity

A. 100

B. ne-twentieth of your annual salary and bonus

C. ne-tenth of your annual salary and bonus

D. 500

E. one of these answers

View answer

Correct Answer: A

Question #119

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

A. 0

B. 9

C. 1

D.

E. 4

View answer

Correct Answer: C

Question #120

Tasty Food, Inc.'s statements have overstated accounts payable by 400 and understated the accounts receivables by 225. Then, which of the following is/are true?

A. ts income is correctly stated

B. I, III and IV

C. & III

D. & IV

E. I & IV

View answer

Correct Answer: C

Question #121

Kelly Clark, CFA, is a fixed income analyst for Convex Capital. She is evaluating a 15-year bond with a 6.0% coupon. At the current interest rate of 5.5%, the bond is priced at $1,050.62. Clark calculates that a 25 basispoint drop in interest rates increases the bond's price to $1,077.20, while a 25 basis point increase in interest rates reduces the bond's price to $1,024.90. Based on the information provided, calculate the bond's effective duration.

A.

B.

C.

View answer

Correct Answer: C

Question #122

A liability can be recognized when

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

B. ny time a future payment is due

C. nly when the amount is certain

D. ll of these answers are correct

View answer

Correct Answer: A

Question #123

Which of the following AIMR Standards states that a financial analyst must consider the suitability of an investment for each client or portfolio before undertaking investment action?

A. V (B

B. II E

C. one of these answers

D. II D

View answer

Correct Answer: A

Question #124

Ian Clark, CFA, is a technical analyst. Clark believes that information is incorporated gradually into securities markets and that, as a technician, he can take advantage of this process. However, tests of the efficient market hypothesis indicate security returns are random over time and new information is processed rapidly. Clark makes the following statements:Statement 1:Studies have reported that small capitalization stock returns are positive on a risk-adjusted basis. Statement 2:Although the academic r

A. oth statements arc correct

B. nly Statement 1 is correct

C. nly Statement 2 is correct

View answer

Correct Answer: B

Question #125

Social factors

A. one of these answers

B. ust be a primary consideration of investments because of the ERISA rule

C. ay never be a primary consideration of investments

D. ay be a primary consideration of investments, depending on the guidelines of the investment policy

E. ust be a primary consideration of investments because of the prudence rule

View answer

Correct Answer: C

Question #126

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. stablish reporting and prior-clearance requirements

B. nsure that procedures will be enforced

C. onsider special situations

D. ontain disciplinary procedures

E. efine personal transactions, investment and prohibited transactions

View answer

Correct Answer: F

Question #127

Which of the following is NOT involved in calculating the operating cash flow from net income from operations?

A. ncrease in current assets in the form of receivables

B. ncrease in current liabilities in the form of payables

C. ain from retirement of debt

D. one of these answers

View answer

Correct Answer: C

Question #128

Which value of r indicates the strongest correlation than 0.40?

A. 0

B. 0

C.

D. 0

E. one of these answers

View answer

Correct Answer: B

Question #129

Which of the following regarding bond market indexes is FALSE?

A. nlike stocks, bonds lack continuous price trading data

B. he bond universe is more stable than the stock universe

C. here are more bond issues than stocks

D. he price volatility of bonds is constantly changing due to the influence of maturity and market yield on bond durations

View answer

Correct Answer: B

Question #130

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

A.

B.

C.

D.

View answer

Correct Answer: C

Question #131

Relationships with and Responsibilities to Clients and Prospects are dealt with under:

A. tandard I

B. tandard III

C. one of these answers

D. tandard II

E. tandard V

View answer

Correct Answer: F

Question #132

Theta Corp.'s stock is expected to appreciate 6% per year. If no dividends are paid out over the next 5 year and the current stock price is $28, what's the expected price in 5 years?

A. 39

B. 37

C. 41

D. 34

View answer

Correct Answer: B

Question #133

Standard IV (B.8), Disclosure of Referral Fees, includes ________.

A. eferral fees paid in cash

B. eferral fees paid "in kind"

C. oft dollar referral fees

D. ll of these answers

View answer

Correct Answer: D

Question #134

Standard III (F) is ________.

A. esponsibilities of Supervisors

B. isclosure of Conflicts to Employer

C. bligation to Inform Employer of Code and Standards

D. isclosure of Additional Compensation Arrangements

E. one of these answers

View answer

Correct Answer: E

Question #135

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

A. axes payable

B. ll of these answers

C. nearned income

D. ccounts payable

E. ccrued salaries

View answer

Correct Answer: B

Question #136

An entry made to recognize the cost of using an asset during the period is

A. closing entry

B. reversing entry

C. n opening entry

D. n adjusting entry

View answer

Correct Answer: D

Question #137

The distribution of the annual incomes of a group of middle management employees approximated a normal distribution with a mean of $37,200 and a standard deviation of $800. About 68 percent of the incomes lie between what two incomes?

A. 36,400 and $38,000

B. one of these answers

C. 34,800 and $39,600

D. 35,600 and $38,800

E. 30,000 and $40,000

View answer

Correct Answer: A

Question #138

Miller heads the research department of a large brokerage firm. The firm has many analysts, some of whom are subject to the Code and Standards. If Miller delegates some supervisory duties, which statement best describes her responsibilities under the Code and Standards?

A. iller's supervisory responsibilities do not apply to those subordinates who are not subject to the Codes and Standards

B. iller no longer has supervisory responsibility for those duties delegated to her subordinates

C. iller retains supervisory responsibility for those duties despite her delegation of some duties

D. IMR's Standards prevent Miller from delegating supervisory duties to subordinates

View answer

Correct Answer: C

Question #139

Under an inflationary, LIFO environment with stable inventories, which of the following is true compared to FIFO?Working Capital Taxes Current Ratio

A. igher Lower LowerII

B. I

C.

D. V

E. II

View answer

Correct Answer: A

Question #140

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

A. xperience

B. rofitability expectancy

C. ustomer fortunes

D. ndustry expectations

View answer

Correct Answer: B

Question #141

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

A.

B.

C.

D. 9

View answer

Correct Answer: B

Question #142

The closing prices of a common stock have been 61 1/2, 62, 61 1/4, 60 7/8, and 61 1/2 for the past week. What is the range?

A. one of these answers

B. 1

C. 1

D. 1

E. 1

View answer

Correct Answer: E

Question #143

Stockholders' Equity is

A. he rights to the assets of the business once the liabilities have been met

B. ssets plus liabilities

C. ll of these answers are correct

D. he financial obligations of the company

View answer

Correct Answer: A

Question #144

Which of the following marketable securities would provide the greatest liquidity and stability?

A. one of these answers

B. ll of these answers

C. A corporate bonds that mature in 5 years

D. ommon stock of a publicly held firm

E.

View answer

Correct Answer: E

Question #145

For which measure of central tendency will the sum of the deviations of each value from that average always be zero?

A. edian

B. eometric mean

C. ean

D. ode

E. one of these answers

View answer

Correct Answer: C

Question #146

A bar owner in Wisconsin has just won the Illinois Big Lotto jackpot that pays $200 million dollars in 25 equal installments paid annually. The bar owner can either accept the annual payments starting today or receive a lump sum today, using a discount rate of 9% per year. If the bar owner chooses to accept the lump sum, how much will he receive today?

A. 85

B. 91

C. 101

D. 105

View answer

Correct Answer: A

Question #147

The Performance Presentation Standards are designed for

A. nvestment consultants

B. urrent clients

C. rospective clients

D. ll of these are beneficiaries of the AIMR Performance Presentation Standards

View answer

Correct Answer: D

Question #148

Which of the following is /are true?

A. simple capital structure is one that does not include any common stock equivalents or dilutive contingent securities

B. & II

C. I & III

D. , II & III

E. only

View answer

Correct Answer: C

Question #149

Standard IV (

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

A. bjectivity

B. one of these answers

C. mpartiality

D. utonomy

E. ustice

View answer

Correct Answer: A

Question #150

Under an inflationary environment with a constant inventory quantity, the LIFO Reserve tends to ________.

A. ncrease over time

B. ecrease over time

C. tays constant over time

D. luctuate with COGS

View answer

Correct Answer: A

Question #151

Two analysts have been asked to submit brief summaries to their supervisor on various risks related to bond investing. Included in these summaries were the following statements from each analyst:Analyst A:In a decreasing interest rate environment, both callable and amortizing securities will experience the negative effects of price compression.Analyst B:The reinvestment risk of a portfolio can be reduced by replacing zero coupon securities with shorter maturity, amortizing securities such as early tranches

A. nly Analyst A is correct

B. nly Analyst B is correct

C. oth analysts are correct

View answer

Correct Answer: A

Question #152

Long-term obligations that are or will become callable by the creditor because of the debtor's violation of a provision of the debt agreement at the balance sheet date should be classified as

A. urrent liabilities unless the creditor has waived the right to demand repayment for more than 1 year from the balance sheet date

B. urrent liabilities unless it is reasonably possible that the violation will be corrected within the grace period

C. ontingent liabilities until the violation is corrected

D. one of these answers

E. ong-term liabilities

View answer

Correct Answer: A

Question #153

Management is considering adopting a bonus system to increase production. One suggestion is to pay a bonus on the highest 5 percent of production based on past experience. Past records indicate that, on the average, 4,000 units of a small assembly are produced during a week. The distribution of the weekly production is approximately normally distributed with a standard deviation of 60 units. If the bonus is paid on the upper 5 percent of production, the bonus will be paid on how many units or more?

A. one of these answers

B. 196

C. 120

D. 099

E. 255

View answer

Correct Answer: D

Question #154

Which of the following is/are true?

A. f a test always rejects the null, its significance level is zero

B. I only

C. only

D. II only

E. I & III

View answer

Correct Answer: C

Question #155

Standard III includes which of the following?

A. one of these answers

B. rofessional Misconduct

C. uty to Employer

D. rohibition against Plagiarism

E. ll of these answers

View answer

Correct Answer: C

Question #156

A study by the National Park Service revealed that 50% of the vacationers going to the Rocky Mountain region visit Yellowstone Park, 40% visit the Tetons and 35% visit both. What is the probability that a vacationer will visit at least one of these magnificent attractions?

A. one of these answers

B.

C.

D.

E.

View answer

Correct Answer: B

Question #157

The interest expense on a discount bond _______ over time.

A. ecreases

B. emains constant

C. an increase or decrease, depending on interest rate movements

D. ncreases

View answer

Correct Answer: D

Question #158

Under ERISA, fiduciaries must:-act solely in the interest of and for the exclusive purpose of benefiting, the plan participants and beneficiaries; -act with the ________, prudence and diligence of a prudent person acting in like capacity; -diversify the plan's investments to protect it from the risk of substantial loss; -act in accordance with the provisions of the plan documents to the extent that the documents comply with ERISA;-refrain from engaging in prohibited transactions.

A. aution

B. are, skill

C. one of these answers

D. ttention

View answer

Correct Answer: B

Question #159

Edwin Hubble, who works for a respectable investment advisory firm, recently found out that his supervisor has been engaging in "front-running," i.e., executing transactions for personal accounts before client accounts. As an AIMR member, he is required to do all of the following EXCEPT?

A. eport the illegal activity to the appropriate regulatory authorities

B. issociate himself from the activity

C. onsult with the legal department on the matter

D. nform senior management about the activity with a view of stopping it

View answer

Correct Answer: A

Question #160

Berger Corporation has a profit margin of 10.0%, total asset turnover of 0.75, financial leverage of 1.6, and debt/equity ratio of 62.5%. Profit margin is defined as Net income/Sales, total asset turnover is Sales/ Total assets, financial leverage is Total assets/Equity, and debt/equity ratio is Total debt/Equity. Berger\s payout ratio is 60.0%. If these ratios are sustainable for the long term, the best estimate of Berger's growth rate of earnings and dividends is:

A.

B.

C.

View answer

Correct Answer: A

Question #161

A researcher has a sample of 600 observations from a population whose standard deviation is known to be 51.44. The mean of the sample is calculated to be 3.6. The null hypothesis is stated as Ho: mean > 8.4. The researcher should

A. ccept the null at 95% significance

B. eject the null at 99% significance

C. ail to reject the null at 95% significance

D. one of these answers

View answer

Correct Answer: B

Question #162

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: B

Question #163

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

A. ot violated the AIMR code of ethics

B. iolated Standard IV (A

C. iolated Standard IV (B

D. iolated Standard IV (A

View answer

Correct Answer: A

Question #164

Which of the following are notations for the covariance between X and Y?

A. ov(X,Y)

B. only

C. I only

D. and II

E. and III

View answer

Correct Answer: C

Question #165

Jack Saunders is analyzing Barco Incorporated, an industrial conglomerate company. Saunders is estimating the intrinsic value for Barco Incorporated by forecasting the company's earnings per share and earnings multiplier. Which of the following attributes of Barco is least likely to increase the company's earnings multiplier?

A. arco Incorporated has never had a restructuring charge in its history

B. arco Incorporated^ earnings move in tandem with overall economic growth

C. arco Incorporated's dividend has been increasing for the last 30 years

View answer

Correct Answer: B

Question #166

The coefficient of variation of X is three times that of Y. If X and Y have the same means, the variance of Y is:

A. one of these answers

B. ame as that of X

C. hree times that of X

D. ne-third that of X

View answer

Correct Answer: A

Question #167

Consider two options, X and Y. Option X has a strike price of S40 and is selling in the marketplace for $4. Option Y has a strike price of $32 and is selling in the market place for $3. The underlying assets for the options, Stock X and Stock Y, have a current market price of $43 and $29, respectively. Which of the following are most likely TRUE about Option X and Option Y?

A. ption X is an expiring call, and option Y is an in-the-money put

B. ption X is an in-the-money put, and option Y is an expiring call

C. ption X is an in-the-money call, and option Y is an expiring put

View answer

Correct Answer: C

Question #168

What is the present value today of these annual cash flows: $2,500, $1,200, $300? Assume the first cash flow occurs 1 year from today and an interest rate of 9% per year, compounded annually.

A. 3,535

B. 4,000

C. 3,976

D. 3,608

E. 3,114

View answer

Correct Answer: A

Question #169

Which AIMR standard states that members must inform employers of their duty to comply with the Code and Standards and must deliver a copy to their employers?

A. X

B. V

C. II A

D. I A

View answer

Correct Answer: C

Question #170

The actual rate of unemployment could fall below the natural rate of unemployment during which of the following?

A. n economic boom

B. I & III

C. & III

D. , II & III

E. V only

View answer

Correct Answer: B

Question #171

A reserve requirement of 12.5 percent implies a potential money deposit expansion multiplier of ________.

A.

B. 2

C. 5

D.

View answer

Correct Answer: A

Question #172

An appreciation of the U.S. dollar

A. s the same thing as an increase in the domestic price level

B. ncreases the purchasing power of the U

C. ecreases the purchasing power of the U

D. s the same thing as a decrease in the consumer price level

View answer

Correct Answer: B

Question #173

Roger Templeton, an analyst for Bridgetown Capital Management, is studying past market data to identify risk factors that produce anomalous returns. He tests monthly data on each of 60 financial and economic variables over a 15-year period to find which ones are related to stock index returns. Based on this research, Templeton identifies three variables that show statistically significant relationships with equity returns. He presents his results to Bridgetown's managers and recommends implementing a tradin

A. ata mining bias

B. urvivorship bias

C. mall sample bias

View answer

Correct Answer: A

Question #174

Cariella is a junior analyst who is currently preparing a report on a diamond producing firm, Dense Carbon, Inc. Dense Carbon recently announced that the results of a mining survey in its South African diamond mines were in, which revealed substantial amounts of diamond reserves for the first time. It has offered to take a few industry analysts for a tour of the facilities and take stock of the situation first hand. During this tour, all expenses, including air-fare and basic accommodations, were provided f

A. iolated Standard III (C) - Disclosure of Conflicts to Employer

B. only

C. and III only

D. , II and III only

E. V only

View answer

Correct Answer: B

Question #175

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

A. 45,000

B. 40,000

C. 30,000

D. 50,000

View answer

Correct Answer: C

Question #176

You are given n = 12, sum of the (X_i) = 2%, sum of the (X_i)^2 = 0.5%%. Find the sample standard deviation.

A.

B.

C.

D.

View answer

Correct Answer: C

Question #177

Which of the following are not required disclosures under the Performance Presentation Standards?

A. ortfolio size range and percentage of total assets in the same class

B. he existence of a minimum asset size for the inclusion in composites

C. he inclusion of any non-fee paying portfolios in composites

D. hether balanced portfolio segments are included in single-asset composites

View answer

Correct Answer: A

Question #178

John buys a house that costs $175,000 and agrees to pay for it with a 15 year mortgage at 7% per year, compounded monthly. What is John's monthly payment on the loan?

A. 972

B. 552

C. 12,218

D. 12,250

E. 1,572

View answer

Correct Answer: E

Question #179

The Basic EPS represents which of the following?

A. he net income divided by number of shares outstanding

B. I & III

C. II & IV

D. , II & IV

E. , II, III & IV

View answer

Correct Answer: A

Question #180

Ball-Bearing, Inc. produces ball bearings automatically on a Kronar BBX machine. For one of the ball bearings, the mean diameter is set at 20mm. the standard deviation of the production over a long period of time was computer to be 0.150 mm. What percent of the ball bearings will have a diameter of 20.27 mm or more?

A. 1

B. 5

C. 2

D. one of these answers

E.

View answer

Correct Answer: E

Question #181

The change in aggregate income/output for a given change in aggregate expenditure is known as the:

A. emand multiplier

B. xpenditure multiplier

C. arginal propensity to consume

D. ncome elasticity

View answer

Correct Answer: B

Question #182

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

A. ll clients and prospects must be treated equally i

B. and II only

C. I and III only

D. I only

E. , II and III

View answer

Correct Answer: C

Question #183

Within the simple Keynesian model, when an economy operates below its long-run, full-employment outputconstraint, an increase in aggregate demand will lead to an increase in

A. eal income

B. nemployment

C. rices

D. mployment, output and prices, but real income will remain constant

E. nterest rates and money income, but employment and real income will remain constant

View answer

Correct Answer: A

Question #184

Wiotech, LLC, a private company, is in the process of developing a revolutionary drug to fight Alzheimer's disease. The drug is in stage 2 development. The management team consists of several experienced clinical doctors. A reputable Wall Street firm has provided venture capital financing. The company would like to go public in the next few years. Which of the following is least likely to be a unique risk of this investment compared to other types of investment?

A. nexperienced entrepreneurs

B. ncertain time to success

C. imited information

View answer

Correct Answer: C

Question #185

Which one of the following actions will not help to ensure the fair treatment of brokerage firm clients when a new investment recommendation is made?

A. inimize elapsed time between the decision and the dissemination of a recommendation

B. imit the number of people in the firm who are aware in advance that a recommendation is to be disseminated

C. istribute recommendations to institutional clients prior to individual accounts

D. onitor the trading activities of firm personnel

View answer

Correct Answer: C

Question #186

The accrual basis of accounting

A. oes not pertain to revenue recognition-only expense recognition

B. ecognizes the development of assets and liabilities externally

C. s used only for taxes reporting purposes

D. egins with the cash basis of accounting and proceeds to make the necessary adjustments

E. llocates many transactions that produce cash flows to time periods other than those in which the cash flows occur

View answer

Correct Answer: E

Question #187

Ken Willis is the portfolio manager of an aggressive growth fund. Ken is concerned about the future performance of his high-beta portfolio in light of his belief that the stock market is currently overvalued. Willis' firm requires that he maintain at least 80% of the portfolio's value in equities at all times. Willis decided his best course of action is to buy put options to protect the portfolio from the potential loss resulting from a market decline. The profits and losses from an equity portfolio combine

A. ong call option

B. hort put and long call position

C. one

View answer

Correct Answer: A

Question #188

Compared to the no-trade situation, when a country exports a good

A. omestic consumers gain, domestic producers lose and the losses outweigh the gains

B. omestic consumers gain, domestic producers lose and the gains outweigh the losses

C. omestic producers gain, but domestic consumers lose an equal amount

D. omestic producers gain, domestic consumers lose and the gains outweigh the losses

View answer

Correct Answer: D

Question #189

Mirabelle is an experienced analyst who has worked for the investment research ARM of Clifford & Clifford, Inc. for the past 7 years. Recently, TransOmega retained Clifford & Clifford to conduct a study on possible takeover candidates in the aviation industry. Mirabelle has been given the project and two assistants to conduct the research. During their review, Mirabelle's assistants located a research report created recently by Donaldson, a freelance analyst. Mirabelle found the report thorough, though she

A. oth Mirabelle and John Cliff violated the standards

B. nly Mirabelle violated the plagiarism standard by using Donaldson's report

C. nly John Cliff violated the Standard of Reasonable Care (IVA

D. either Mirabelle nor John Cliff violated any of the standards

View answer

Correct Answer: D

Question #190

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

A. 7,560

B. 5,200

C. 4,300

D. 3,580

E. 6,800

View answer

Correct Answer: B

Question #191

The AIMR-PPS recommend that both ________ and ________ risks be presented in conjunction with composite returns.

A. bsolute; unsystematic

B. otal; market

C. xternal; internal

D. nsystematic; systematic

View answer

Correct Answer: B

Question #192

Level ________ verification applies to the firm.

A. I

B. V

C.

D. II

E.

View answer

Correct Answer: C

Question #193

Which is true of a leptokurtic distribution?

A. t will be more peaked than the normal distribution

B. and II

C. and IV

D. II and II

E. II and IV

View answer

Correct Answer: B

Question #194

Edward Witten works for Princeton Investments and has registered to take Level III exam next year. He had taken the Level III exam 3 years ago but was not successful. In his firm's promotional material, he has stated that he is a candidate in the CFA program and has successfully passed Level II. Edward has:

A. iolated Standard II (A) - Use of Professional Designation

B. iolated Standard II (A) - Use of Professional Designation

C. ot violated any standards

D. iolated Standard II (A) - Use of Professional Designation

View answer

Correct Answer: C

Question #195

At the end of an accounting period, each expense that has been incurred but not yet paid should be recorded as

A. reversing entry

B. n opening entry

C. n adjusting entry

D. closing entry

View answer

Correct Answer: C

Question #196

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

A. 0

B. 0

C. 5

D. 5

E. one of these answers

View answer

Correct Answer: C

Question #197

An economy is currently in a state of equilibrium, at full employment. If a sudden supply shock were to decrease aggregate supply, which of the following effects will occur in the short run?

A. eal interest rates will increase

B. I & III

C. & III

D. , II & III

E. , II & IV

View answer

Correct Answer: D

Question #198

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

A. o recognize the expense of using fixed assets

B. ll of these answers

C. roper statement of net income

D. o be consistent with the matching principle

View answer

Correct Answer: B

Question #199

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

A. resentation; measurement

B. one of these answers

C. resentation; benchmarking

D. ssessment; benchmarking

E. easurement; assessment

View answer

Correct Answer: A

Question #200

What semiannual deposits are needed to accumulate $7,000 in 5 years if the account pays 6% per year, compounded semiannually, assuming that the first deposit is made in 6 months and also assuming that the account already has $1,750 in it today?

A. 405

B. 377

C. 436

D. 459

E. 578

View answer

Correct Answer: A

Question #201

Rock Inc. maintains a policy of paying 30% of earnings to its investors in the form of dividends. Rock is expected to generate a return on equity of 9.3%. Rock's beta is 1.5. The equity risk premium is 6% and U.S. Treasury notes are yielding 3%. Rock's required rate of return is closest to:

A.

B.

C. 2

View answer

Correct Answer: A

Question #202

A reserve requirement of 5 percent implies a potential money deposit multiplier of ________.

A. 0

B.

C. 0

D. 5

E. 00

View answer

Correct Answer: A

Question #203

Treasury stock is

A. ssets held for safekeeping in company's vaults

B. company's own stock that it has repurchased

C. etained earnings that have been appropriated to make equity investments

D. nvestments in government securities

View answer

Correct Answer: B

Question #204

What annual interest rate, compounded quarterly, would cause a series of 20 quarterly deposits of $800 to accumulate to $25,000, if the first deposit is made three months from today?

A. 2

B. 9

C. 9

D. 7

E. 8

View answer

Correct Answer: D

Question #205

A board of directors consists of eight men and four women. A four member search committee is to be chosen at random to recommend a new company president. What is the probability that all four members of the search committee will be women?

A. one of these answers

B. /16 or 0

C. /495 or 0

D. /8 or 0

E. /120 or 0

View answer

Correct Answer: C

Question #206

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

A.

B.

C.

View answer

Correct Answer: C

Question #207

Standard V (A), Prohibition against Use of Material Nonpublic Information, states that the test for determining if a tipper is breaching a fiduciary duty

A. s whether the tippee benefits directly or indirectly from the disclosure

B. s whether the tipper benefits directly or indirectly from the disclosure

C. s whether the tipper benefits directly from the disclosure

D. s whether the insider benefits directly from the disclosure

E. one of these answers

View answer

Correct Answer: B

Question #208

In a distribution that is right skewed:

A. he median is larger than the mean

B. arge negative deviations dominate large positive deviations

C. he mean is positive

D. arge positive deviations dominate large negative deviations

View answer

Correct Answer: D

Question #209

In a statistical regression estimation, the R-square is found to be 63% and the slope coefficient is 0.6. The correlation coefficient between the dependent and the independent variables is ________.

A.

B.

C.

D.

View answer

Correct Answer: D

Question #210

The deferred income tax account

A. one of these answers

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

View answer

Correct Answer: D

Question #211

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

A. ot violated any code of ethics

B. II and IV only

C. I and III only

D. only

E. I only

View answer

Correct Answer: D

Question #212

All of the following are typically fixed expenses except for ________.

A. aw materials

B. ent

C. nsurance

D. roperty taxes

View answer

Correct Answer: A

Question #213

If you deposit $150 a month, beginning next month, for 20 years into an account paying 6% per year, compounded monthly, how much is in your account after the last deposit?

A. 70,343

B. 48,833

C. 49,904

D. 143,582

E. 69,306

View answer

Correct Answer: E

Question #214

In a statement of cash flows done using the indirect method all of the following would be included as cash flows from investing activities except for:

A. urchase of fixed assets

B. ale of fixed assets

C. ll would be included as cash flows from investing activities

D. ain on sale of equipment

View answer

Correct Answer: D

Question #215

You are examining a group of 3 stocks within an industry. The industry average debt-to-equity ratio is expected to be 40%. For these stocks, the average debt-to-equity ratios have been 50%, 40%, and 30%. What is the mean absolute deviation of debt-to-equity ratios from the industry average?

A. 3

B.

C. 0

D. %

View answer

Correct Answer: B

Question #216

An acceleration in the growth rate of the money supply is known as ________.

A. xpansionary monetary policy

B. estrictive monetary policy

C. he quantity of money

D. he velocity of money

E. xcess supply of money

View answer

Correct Answer: A

Question #217

What annual interest rate, compounded annually, will cause a deposit of $850 to become $1,475 in 10 years?

A.

B.

C.

D.

E.

View answer

Correct Answer: A

Question #218

In computing EPS, the equivalent number of shares of convertible preferred stock is added as an adjustment to the denominator (number of shares outstanding). If the preferred stock is preferred as to dividends, which amount should then be added as an adjustment to the numerator (earnings available to common shareholders)?

A. nnual preferred dividend

B. nnual preferred dividend times (100% minus the income tax rate)

C. nnual preferred dividend divided by the income tax rate

D. o adjustment should be made

E. nnual preferred dividend times the income tax rate

View answer

Correct Answer: A

Question #219

A loss contingency should be accrued on a company's records only if it is

A. easonably possible that a liability has been incurred and the amount of the loss is known

B. emotely probable that a liability has been incurred but the amount of the loss can be reasonably estimated

C. robable that a liability has been incurred and the amount of the loss is unknown

D. one of these answers

E. robable that a liability has been incurred and the amount of the loss can be reasonably estimated

View answer

Correct Answer: E

Question #220

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

A.

B.

C. one of these answers

D.

E.

View answer

Correct Answer: B

Question #221

An economy is currently operating at full employment. If the Fed unexpectedly decreases the reserve requirement, in the short run, the aggregate output will ________. The unemployment will ________ the natural rate.

A. all, rise above

B. ise, fall below

C. ise, rise above

D. all, fall below

View answer

Correct Answer: B

Question #222

A sample of the paramedical fees charged by clinics revealed these amounts: $55, $49, $50, $45, $52 and $55.What is the median charge?

A. one of these answers

B. 51

C. 47

D. 52

E. 55

View answer

Correct Answer: B

Question #223

The dollar would have appreciated if

A. he U

B. nder fixed exchange-rates, the number of dollars demanded in the foreign exchange market increased

C. t had been exchanging for one mark but can now be exchanged for two

D. t had been exchanging for three marks but can now be exchanged for two

View answer

Correct Answer: C

Question #224

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

A. iquidity needs

B. egulatory and legal circumstances

C. isk tolerance

D. ax considerations

E. xpected cash flows

View answer

Correct Answer: C

Question #225

How much would you need to deposit today in order to be able to withdraw $500 in 2 years and $700 in 4 years, if the account has nothing in it today and interest is 6% per year, compounded annually?

A. 999

B. 1,007

C. 445

D. 1,200

E. 950

View answer

Correct Answer: A

Question #226

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

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

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

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

View answer

Correct Answer: C

Question #227

How much must you deposit today in order to withdraw $500 in 1 year, $700 in 3 years and $500 in 4 years,assuming your money earns 6.5% per year, compounded annually?

A. 1,200

B. 1,503

C. 1,240

D. 1,421

E. 1,437

View answer

Correct Answer: E

Question #228

During periods of rapid growth in output

A. here has been no consistent relationship between output growth and employment or unemployment

B. oth employment and unemployment generally rise

C. mployment generally decreases and unemployment increases

D. mployment generally increases, while unemployment decreases

E. oth employment and unemployment generally fall

View answer

Correct Answer: D

Question #229

What is the primary function of the Securities and Exchange Commission as it relates to a company's financial statements?

A. one of these answers

B. o function as the standard-setting body of the accounting profession

C. o provide the investment public with completely independent and unbiased advice regarding the purchase of good quality public securities

D. o ensure that a public company makes full and accurate disclosure of all pertinent information relating to a company's business

View answer

Correct Answer: D

Question #230

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

A. 92 per share

B. 102 per share

C. 112 per share

View answer

Correct Answer: B

Question #231

As the head of a trading desk at a major bank, it is your job to evaluate whether the superior performance of a trader is due to skill or luck. To test this, you set up the following hypothesis:Ho: Expected excess returns = 0H1: Expected excess returns > 0The excess returns are returns adjusted for risk using a proprietary factor model. In this set-up, which of the following is/are true?

A. ou must employ a one-tailed test

B. only

C. I & III

D. & III

E. & II

View answer

Correct Answer: D

Question #232

Jacques Fontenot wants to place an order to purchase 10,000 shares of BQ Inc. at a price of 75.00 or below. The shares are currently trading for 82.1 bid and .82.2 ask. What type of order should Fontenot place?

A. arket order

B. top loss order

C. imit order

View answer

Correct Answer: C

Question #233

Rose Half, CFA, is analyzing EI Toro Electric Company. She has collected the following data:What is El Toro Electric Company's expected long-run rate of return?

A. 0

B. 3

C. 5

View answer

Correct Answer: B

Question #234

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

A. evenue account

B. sset account

C. iability account

D. xpense account

View answer

Correct Answer: A

Question #235

An analyst is considering buying a call option on ZXC stock, which is currently trading at $33.75 per share. Three month call options with a strike price of $30 are trading at a premium of $4.50. Identify which of the following statements is most likely true regarding the ZXC call options.

A. he ZXC call options are currently out of the money

B. he breakeven underlying price for ZXC stock is $38

C. he potential upside of the ZXC call options is unlimited

View answer

Correct Answer: C

Question #236

The Jones company had a net receivable balance at the beginning of 1998 of $350,000 and ended 1998 with a receivable balance of $400,000. During the year the company had credit sales of $1,000,000 and cash sales of $200,000. How much cash did the company collect during 1998?

A. 1,050,000

B. 950,000

C. 1,150,000

D. 1,250,000

View answer

Correct Answer: C

Question #237

Kevin wants to retire a millionaire. If he is 45 years old today and already has $80,000 in the bank, what monthly deposit would he need to make beginning one month from today and continuing until he retires on his 65th birthday, if the money will earn 8% per year, compounded monthly?

A. 1,028

B. 1,760

C. 407

D. 1,138

E. 2,119

View answer

Correct Answer: A

Question #238

A sample of single persons receiving social security payments revealed these monthly benefits: $826, $699, $1,087, $880, $839 and $965. How many observations are below the median?

A.

B.

C.

D.

E. one of these answers

View answer

Correct Answer: B

Question #239

The ages of all the patients in the isolation ward of the hospital are 38, 26, 13, 41 and 22. What is the population variance?

A. 1

B. 06

C. one of these answers

D. 40

E. 2

View answer

Correct Answer: B

Question #240

The semi-logarithmic scale is so named because:

A. alues on the x-axis are equally spaced if their logarithms are the same

B. alues on the y-axis are equally spaced if their logarithms are the same

C. alues on the x-axis are equally spaced if there are equal differences in their logarithms

D. alues on the y-axis are equally spaced if there are equal differences in their logarithms

View answer

Correct Answer: D

Question #241

An organization purchased a computer on January 1, 1996 for $108,000. It was estimated to have a 4- year useful life and a salvage value of $18,000. The double-declining-balance method is to be used. The amount of depreciation to be reported for the year ending December 31, 1996 is ________.

A. $108,000 - 18,000) (25% X 2)

B. $108,000) (25% X 2)

C. $108,000 - 18,000) (25% X 1/2)

D. $108,000) (25%)

E. $108,000) (25% X 1/2)

View answer

Correct Answer: B

Question #242

Which of the following is not an example of an inflationary change in prices?

A. car dealer decides to charge more for a new model year of cars because of new features II

B. , II

C. , III

D. only

E. I, III

View answer

Correct Answer: F

Question #243

The primary purpose of the statement of cash flows is to

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

B. easure the change in the company's assets

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

D. nalyze net income during the accounting period

View answer

Correct Answer: A

Question #244

If you want $1,000,000 when you retire in 25 years, how much must you deposit each month, beginning one month from today, if your funds will earn 9% per year, compounded monthly?

A. 7,336

B. 903

C. $29,848

D. 891

E. 29,848

View answer

Correct Answer: D

Question #245

The statement of cash flows includes sections on all of the following except ________.

A. inancing activities

B. urchasing activities

C. nvesting activities

D. perating activities

View answer

Correct Answer: B

Question #246

Which of the following are true regarding correlation?

A. orrelation is a number between 0 and 1

B. ll but I

C. ll are true

D. ll but III

E. ll but II

View answer

Correct Answer: A

Question #247

What is the Net Present Value of this series of annual cash flows at an interest rate of 14% per year: Year 0:<$4,000>, Year 1: $2,000, Year 2: $0, Year 3: $0, Year 4 to indicate a negative number).

A. 214

B. $67

C. 122

D. 1

E. $179

View answer

Correct Answer: C

Question #248

Basic earnings per share is calculated as:

A. Net Income- Dividends]/Weighted Avg # of shares outstanding

B. Net Income-Preferred Dividends]/Weighted Avg # of common shares outstanding

C. Net Income]/[Common shares outstanding]

D. Net Income-Preferred Dividends]/[Weighted Avg # of common shares outstanding] - EPS impact of diluted convertibles

View answer

Correct Answer: B

Question #249

You can enter a derivative contract that will pay $100 at the end of a year if the price of oil exceeds $25 per barrel, or $50 if it is equal to $25 or lower. The probability that oil will exceed $25 by the end of one year is 60%. If interest is 4% for one year, what should the fair price of the contract be?

A. 80

B. 76

C. 60

D. 83

View answer

Correct Answer: B

Question #250

A bell-shaped, symmetrical frequency distribution has a mean of 5 and a standard deviation of 2.5. The percentage of observations less than zero is about:

A. annot be calculated

B. %

C. 0%

D.

View answer

Correct Answer: D

Question #251

Calculating COGS under a periodic inventory system relies on which of the following?

A. physical count of the ending inventory

B. n analysis of the inventory value of each sale

C. oth of these answers are correct

D. either of these answers is correct

View answer

Correct Answer: A

Question #252

A normal distribution has a mean of 4.1 and a standard deviation of 2.3. The probability that a value from this distribution will be negative equals ________.

A.

B.

C.

D.

View answer

Correct Answer: B

Question #253

Anti-dilutive securities are those that:

A. re always included in the computation of the Diluted EPS

B. ifferentiate between a simple capital structure and complex capital structure

C. one of these answers

D. ncrease the earnings per share when assumed exercised

View answer

Correct Answer: D

Question #254

Suppose you have two assets, A and B. A has returns of 10%, 2%, and 15%, with probabilities 40%, 50%, and 10% respectively. B has returns of 5%, 10%, and -20%, with probabilities 40%, 50%, and 10% respectively.What is the return covariance between assets A and B?

A. 50

B. 60

C. 10

D. 32

View answer

Correct Answer: D

Question #255

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

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

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

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

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

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

View answer

Correct Answer: A

Question #256

Pete Morris has written a deep out-of-the-money call option on the stock of Omacon, a small capitalization technology company with a very promising medical software product. Omacon stock had risen 365% for the 12 months ended just three weeks ago, but delays with release of the new software have disappointed investors, and the stock has lost 50% of its market value in the past three weeks. When he wrote the options yesterday, Morris received a premium of $3.00 each. Morris would have risk only:

A. f the stock price rose above the option strike price

B. f the stock price fell below the option strike price

C. n the amount of the premium he received

View answer

Correct Answer: A

Question #257

Peter Ulrich runs a hedge fund which specializes in using option strategies to enhance the fund's returns. In a training session for newly hired analysts, Ulrich explains option characteristics as follows: "The maximum profit on a short call position is always less than the maximum profit on a long call position and a long at-the-money put option position will break even as soon as the price of the underlying stock decreases." Determine whether Ulrich is correct with regard to his statements about call opti

A. lrich is correct regarding call options only

B. lrich is correct regarding put options only

C. lrich is correct regarding both call and put options

View answer

Correct Answer: A

Question #258

Rich owns a shoe factory. He believes that a recent monetary policy announcement will cause 5% inflation over the next year, equally effecting the price of shoes, the cost of inputs, and wages. How will Rich change his production plans considering this forecast?

A. e will try to hide this information from his laborers

B. annot determine, this depends on how much prices actually inflate over the next year

C. e will increase shoe production because the expansionary monetary policy should boost consumer confidence and hence shoe demand

D. o changes

E. e will increase shoe production to take advantage of higher prices

View answer

Correct Answer: D

Question #259

Which of the following is/are differences between depreciation and depletion?

A. epletion can be applied only to natural resources while depreciation can be applied to most production resources

B. I & III

C. & II

D. , II & III

E. one of these answers

View answer

Correct Answer: B

Question #260

If r = .65, what does the coefficient of determination equal?

A.

B. one of these answers

C.

D.

E.

View answer

Correct Answer: A

Question #261

You are examining a group of 4 stock analysts within an industry. The average stock analyst correctly predicts the direction of a given stock 51% of the time. For these analysts, their accuracy has been 40%, 50%, 60%, and 70%. What is the mean absolute deviation of their accuracy from the average?

A. 2%

B. 0%

C. 5%

D. %

View answer

Correct Answer: B

Question #262

What deposit would you need to make today in order to withdraw $200 a month, beginning next month, for the next 5 years, if the deposit will accrue interest at 8% per year, compounded monthly?

A. 7,237

B. 9,863

C. 11,492

D. 8,399

E. 9,141

View answer

Correct Answer: B

Question #263

According to SFAC 5, the condition(s) that must be met for revenue recognition to take place is

A. he ability to measure the revenue amount

B. here must be no remaining significant contingent obligation that pertains to the sale

C. he verbal or written agreement of the sale

D. he ability to recognized when the revenue actually takes place

E. he completion of the earnings process and assurance of payment

View answer

Correct Answer: E

Question #264

The allowance for uncollectible accounts is

A. reduction in revenue

B. liability

C. ong-term asset

D. contra account

View answer

Correct Answer: D

Question #265

A bank savings account offers a savings rate of 3.5% per year, compounded annually. How long would it take for an investment of $710 to grow to $1,000?

A. years

B. years

C. 1 years

D. 0 years

View answer

Correct Answer: D

Question #266

"Prohibited transactions" are discussed in Standard IV (B.4), Priority of Transactions. Which of the following is NOT suggested as a prohibited transaction for investment personnel?

A. quity-based IPOs

B. rivate placements

C. quity securities

D. one of these answers

E. unicipal bonds

View answer

Correct Answer: E

Question #267

In a period of falling 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 #268

What is the future value of $450 per year for 10 years, with the first cash flow occurring today, rather than 1 year from now? Assume interest is 7% per year, compounded annually.

A. 6,652

B. 6,217

C. 3,381

D. 3,160

E. 4,951

View answer

Correct Answer: A

Question #269

A firm decides to capitalize the interest expenditure on a large, building construction project, instead of expensing it. This ________ its debt-to-equity ratio.

A. as an ambiguous effect on

B. eaves unaffected

C. ecreases

D. ncreases

View answer

Correct Answer: C

Question #270

A new payroll tax on businesses results in an increase in cost for each unit of production. Assuming no change in income or in the production mix, would this cause inflation?

A. es, because producers would pass new costs onto consumers

B. o, because firms would choose to use more capital and less labor

C. es, because government spending would increase aggregate demand

D. es, because higher costs result in less production and lead to higher prices

E. o, because firms are "price takers" and will be unable to increase prices

View answer

Correct Answer: D

Question #271

In 1998, firm A's financial statements showed the following:Net income = $23,000Operating cash flows = $10,000Financing cash flows = $24,000Non-cash expenses = $19,000Change in cash accounts = $6,500Cash spent on acquiring operating capacity = $19,000Then, the investing cash flow of the firm in 1998 was ________.

A. $27,500

B. 42,000

C. $19,000

D. 69,500

View answer

Correct Answer: A

Question #272

The U.S. Federal Aviation Administration reported that passenger revenues on international flights increased from $528 million in 1972 to $5,100 million in 1995. What is the geometric mean annual percent increase in international passenger revenues?

A. one of these answers

B. 7

C.

D. 03

E. 0

View answer

Correct Answer: E

Question #273

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

A. uperior returns using past and current information

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

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

D. uperior returns using only past information

View answer

Correct Answer: C

Question #274

Which of the following are characteristics of material nonpublic information?

A. he information may be considered relevant by reasonable investors

B. he information would have a substantial impact on the market if released

C. ll of these answers

D. he information has not been generally disclosed

View answer

Correct Answer: C

Question #275

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

A. ember

B. upervisor

C. rudent expert

D. one of these answers

E. rader

View answer

Correct Answer: C

Question #276

The following is a distribution of monthly commissions:Monthly Commissions Class Frequencies$600 - $7993$800 - $9997$1,000 - $1,19911$1,200 - $1,39922$1,400 - $1,59940$1,600 - $1,79924$1,800 - $1,9999$2,000 - $2,1994Referring to the table above, what is the relative frequency for those salespersons that earn between $1,600 and $1,799?

A. 4%

B.

C. one of these answers

D. 0%

E. %

View answer

Correct Answer: D

Question #277

Which of the following is/are true?

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

B. I & IV

C. , II & IV

D. only

E. I only

View answer

Correct Answer: E

Question #278

The following data are taken from the AlphaBeta Company's financial statements ending Dec 31, 1990:Increase in salaries payable 120Decrease in accounts payable 45Provision for bad debt 15Depreciation 90Interest paid 35Proceeds from new bonds issued 225Net Income 350Tax rate 35%What was AlphaBeta's operating cash flow in 1990?

A. 50

B. 05

C. 20

D. 30

View answer

Correct Answer: D

Question #279

Which of the following would not be a limitation of the balance sheet?

A. ong-lived assets may not reflect their market value because they are stated at historical cost

B. ignificant assets and liabilities may be omitted because GAAP does not require their inclusion

C. AAP permits companies to delay recognition of value changes, such as employee benefit plans

D. ome assets and liabilities are carried at historical cost bearing little relationship to their real market value

E. he firm's market value would not be able to be estimated due to historical costing

View answer

Correct Answer: E

Question #280

Siegel, Inc. has issued bonds maturing in 15 years but callable at any time after the first 8 years. The bonds have a coupon rate of 6%, and are currently trading at $992 per $ 1,000 par value. If interest rates decline over the next few years:

A. he call option embedded in the bonds will increase in value, but the price of the bond will decrease

B. he price of the bond will increase, but probably by less than a comparable bond with no embedded option

C. he price of the bond will increase, primarily as a result of the increasing value of the call option

View answer

Correct Answer: B

Question #281

A firm needs to purchase 20 warehouses in various states. To finance the purchases, it issues new shares in a seasoned equity offering. It also issues high coupon bonds on which interest must be paid semi-annually. If the firm purchases the warehouses at the beginning of the year, which of the cash flows will be affected in the year- end statements?Investing Operating Financing

A. ffected affected affectedII

B.

C. I

D. V

E. II

View answer

Correct Answer: A

Question #282

Compared with firms with capital leases, firms with operating leases generally report

A. ower cash flow from operations

B. ower or higher cash flow from operations depending upon market interest rates

C. igher cash flow from operations

D. dentical cash flow from operations

View answer

Correct Answer: A

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