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

Question #1

________ exchange-rates are determined by the market forces of supply and demand.

A. one of these answers

B. ixed

C. ixed

D. lexible

View answer

Correct Answer: D

Question #2

When both exports and imports are considered, the major advantage of international trade is that it allows us to

A. hare our technology and efficiency with less-developed countries that would otherwise never have the opportunity to observe modern goods and services

B. ample foreign products that many of us would otherwise never see

C. onsume a larger, more diverse quantity of goods and services at lower prices than would otherwise prevail

D. aintain jobs for workers who would otherwise have little to do

View answer

Correct Answer: C

Question #3

John was offered a salary of $25,000 when he graduated from school 15 years ago. He was somewhat depressed to read that the average starting salary for someone with his degree today was $45,000. He then decided to determine the annual, compound rate of increase implied in the increase of the starting salary from $25,000 to $45,000 in 15 years. What is this annually compounded growth rate?

A.

B.

C.

D.

E. 2

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Correct Answer: A

Question #4

James Martindale, CFA, manages a small mutual fund specializing in defensive equity investments. Martindale has purchased 10,000 shares of BLM stock for the portfolio after deciding that the stock would contribute tomeeting the fund's objectives. Which of the following characteristics would make BLM stock suitable for Martindale's mutual fund?

A. high beta

B. ow systematic risk

C. igher rate of return than other stocks with similar risk characteristics

View answer

Correct Answer: B

Question #5

Which of the following is true regarding Standard II (A)?

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

B. ll of these answers

C. andidates may state that they have completed Level I, II, or III

D. here is no designation for someone who has passed Level I, II, or III

E. his standard relates to oral statements

View answer

Correct Answer: B

Question #6

Standard III includes rules on which of the following?

A. rofessional Misconduct

B. ll of these answers

C. rohibition against Plagiarism

D. bligation to Inform Employer of Code and Standards

E. se of Professional Designation

View answer

Correct Answer: D

Question #7

How much must you deposit today if you wish to have $20,000 in 10 years, assuming that interest accumulates at 9% per year, compounded annually?

A. 2,000

B. 9,104

C. 8,448

D. 7,236

E. 7,103

View answer

Correct Answer: C

Question #8

What quarterly payment is required beginning one period from today to pay off a $3,000 debt, if interest accrues at 6% per year, compounded quarterly, and the debt is to be retired in 10 years?

A. 107

B. 88

C. 114

D. 87

E. 100

View answer

Correct Answer: E

Question #9

An empirical finance professor estimates the following regression between the return on a stock, R, and the return on S&P 500 index, Rsp:R = 5% + 1.1 Rsp + error termIf the regression R-square is 0.25, estimate the change in the return on the stock when the return on the S&P 500 index changes from 12% to 15%.

A. 9

B.

C. 8

D.

View answer

Correct Answer: D

Question #10

In a pension plan, the duty of a fiduciary is to the ________.

A. oard of Directors

B. one of these answers

C. lan sponsor

D. mmediate supervisor

E. lan participants and their beneficiaries

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Correct Answer: E

Question #11

According to the AIMR-PPS, ________ are defined to include all discretionary and nondiscretionary assets.

A. ndividually managed assets

B. ndividual investor's assets

C. otal firm assets

D. lobal assets

View answer

Correct Answer: C

Question #12

A new extended life light bulb has an average service life of 750 hours, with a standard deviation of 50 hours. If the service life of these light bulbs approximates a normal distribution, about what percent of the distribution will be between 600 hours and 900 hours?

A. 5%

B. 8%

C. one of these answers

D. 4%

E. 9

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Correct Answer: E

Question #13

The supply curve for American dollars in the foreign exchange market:

A. one of these answers

B. s dependent on the purchases of American goods by foreigners

C. s independent on the purchases of American goods by foreigners

D. s dependent on the purchases of foreign goods by Americans

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Correct Answer: D

Question #14

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

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

B. II only

C. & III

D. , II & III

E. I only

View answer

Correct Answer: B

Question #15

"Counter-cyclical macroeconomic policy will be ineffective as a stabilization tool because people will undermine the policy by adjusting their choices once they expect a systematic policy response to recessions and booms." This statement most clearly reflects the

A. eynesian view

B. ational expectations view

C. upply-side view

D. 960 view of the Phillips curve

View answer

Correct Answer: B

Question #16

Which of the following can be found in Standard I?

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

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

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

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

E. embers shall not misrepresent investment performance

View answer

Correct Answer: C

Question #17

Inflation has been about 5% for the last several years. There is widespread fear that oil and natural gas prices are about to spike at the same time there is unusually high unemployment. If inflation were actually 6% next year, and this causes no change in real GDP, what can be said about the general expectation for inflation?

A. roducers were forming inflation forecasts based on rational expectations

B. he general consensus inflation forecast must have been less than 6%

C. roducers were basing their inflation views on adaptive expectations

D. onsumers must have foreseen inflation of 6% and increased savings accordingly

E. he oil scare held down GDP

View answer

Correct Answer: D

Question #18

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

A. onorability

B. ignity

C. orality

D. one of these answers

E. irtue

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Correct Answer: B

Question #19

What is the Net Present Value of this series of annual cash flows using an interest rate of 12% per year: Year0: <$15,000>, Year 1: $8,000, Year 2: $8,000, Year 3: $1,000, Year 4: $4,000? (Note that the <> are used to indicate a negative number).

A. 2,077

B. 1,589

C. 1,774

D. 1,981

E. 1,104

View answer

Correct Answer: C

Question #20

Standard IV (B.5) deals with ________.

A. isclosure of Conflicts to Clients and Prospects

B. rohibition against Use of Material Nonpublic Information

C. one of these answers

D. reservation of Confidentiality

E. rohibition against Misrepresentation

View answer

Correct Answer: D

Question #21

Suppose 1,600 of 2,000 registered voters sampled said they planned to vote for the Republican candidate for president. Using the 0.95 degree of confidence, what is the interval estimate for the population proportion (to the nearest tenth of a percent)?

A. 7

B. 8

C. 9

D. one of these answers

E. 6

View answer

Correct Answer: B

Question #22

An investor purchases oil commodity futures contracts worth $25 million and an equal amount of 10-year Treasury notes with an interest rate of 3.5%. Assuming that oi! prices rise by 10% and the price of the notes remains unchanged, the total return of the position after three months is closest to:

A. 2,500,000

B. 2,600,000

C. 2,700,000

View answer

Correct Answer: C

Question #23

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

A. ividends paid$25,000

B. ale of land$64,000

C. nventory purchases$29,000

D. urchase of a warehouse$208,000

E. onds issued$90,000

View answer

Correct Answer: D

Question #24

What is the purpose of information presented in notes to the financial statements?

A. o provide disclosures required by generally accepted accounting principles

B. o present management's responses to auditor comments

C. o provide recognition of amounts not included in the totals of the financial statements

D. o correct improper presentation in the financial statements

E. one of these answers

View answer

Correct Answer: A

Question #25

An investor faces the following investment scenarios:Scenario Probability ReturnBull market 60% 30%Neutral market 30% 7%Market crash 10% -25%The investor's expected rate of return is ________.

A. 2

B. 7

C. 6

D. 9

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Correct Answer: B

Question #26

Level ________ verification applies to specific composites.

A.

B. V

C. I

D.

E. II

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Correct Answer: C

Question #27

The allocation of shares in oversubscribed IPOs to investment managers for their personal account is a perk that is most clearly a violation of Standard ________.

A. I (B) - Professional Misconduct

B. V (A

C. one of these answers

D. V (B

E. V (B

View answer

Correct Answer: B

Question #28

Property, Plant & Equipment has all of the following characteristics except:

A. hey are intended for use in operating activities, and are not acquired for sale in the ordinary course of business

B. hey are classified as noncurrent tangible assets

C. heir service potential diminishes with use

D. hey don't typically make up a large part of a corporation's operating assets

View answer

Correct Answer: D

Question #29

The two primary qualities of accounting information to make it useful for decision-making are ________.

A. ateriality and comparability

B. ull disclosure and relevance

C. eliability and comparability

D. elevance and reliability

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Correct Answer: D

Question #30

In allowing a claim of being in compliance with the PPS, AIMR requires that the compliance be on a "firmwide" basis. Which of the following does not qualify as "a firm" in this requirement?

A. subset of assets managed in one or more base currencies

B. n entity registered with the appropriate regulatory authority

C. subsidiary or a division of a parent organization

D. one of these answers

View answer

Correct Answer: A

Question #31

An AIMR member has violated one of the AIMR code of ethics standards. However, according to the laws of the country governing his behavior, he has done nothing wrong. Then,

A. IMR can take disciplinary action against her

B. IMR cannot take disciplinary action against her

C. here is no violation of the code since local laws were adhered to

D. one of these answers

View answer

Correct Answer: A

Question #32

Under the Percentage-of-completion method of recognizing contract revenue, common methods of estimation of completion include all of the following except:

A. atio of units completed to total units expected to be completed

B. atio of costs incurred by expected total costs

C. atio of profits of the company year to date to expected profits for the year of the company

D. atio of units delivered to total units expected to be delivered

View answer

Correct Answer: C

Question #33

Assume you buy a car for $20,000 today and agree to pay $200 a month, beginning next month, for 4 years with a final payment also due 4 years from today to pay off any remaining balance. How large will that final payment be, if interest accrues at 5.9% per year, compounded monthly?

A. 19,590

B. 24,280

C. 19,204

D. 10,400

E. 14,511

View answer

Correct Answer: E

Question #34

If you were to receive $100 per year for the next 10 years, starting today, and the discount rate applicable is 9% per year, what's the value of this stream of cash flows to you?

A. 700

B. 600

C. 678

D. 642

View answer

Correct Answer: A

Question #35

An improvement in technology would shift which of the following curves?

A. ggregate demand and long-run aggregate supply

B. hort-run and long-run aggregate supply

C. nly short-run aggregate supply

D. ggregate demand and short-run aggregate supply

E. nly aggregate demand

View answer

Correct Answer: B

Question #36

Relative to the French franc, the dollar has over the period 1973 to 1993:

A. allen from a high of 25

B. one of these answers

C. allen from a high of 22

D. isen from 22

E. as remained relatively stable around 15 francs to the dollar

View answer

Correct Answer: C

Question #37

The "Management Discussion and Analysis" section of the stockholder's report need not contain which of the following?

A. nalysis of cash flows and liquidity

B. II & IV

C. II only

D. & II

E. V only

View answer

Correct Answer: A

Question #38

Sally Ferguson, CFA, is a hedge fund manager. Ferguson utilizes both futures and forward contracts in the fund she manages. In speaking with a client, Ferguson makes the following statements to answer their questions about futures and forward contracts:Statement 1:A futures contract is an exchange traded instrument with standardized features. Statement 2:Forward contracts are marked-to-market on a daily basis to reduce credit risk to both counter parties.Indicate whether Statement 1 and Statement 2 are most

A. nly Statement 1 is correct

B. nly Statement 2 is correct

C. oth statements are correct

View answer

Correct Answer: A

Question #39

A liability can be recognized when

A. hen the amount is uncertain

B. hen the identity of the creditor is uncertain

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

D. ll of these answers are correct

View answer

Correct Answer: D

Question #40

Which of the following is/are TRUE?

A. osses due to union strike at a plant are classified as extraordinary items

B. I & III

C. & IV

D. & II

E. II & IV

View answer

Correct Answer: D

Question #41

The Income Statement:

A. eflects the current operating performance of the firm

B. , II, III & IV

C. I & III

D. only

E. & IV

View answer

Correct Answer: C

Question #42

To carry out a comparative analysis of a firm's financial statements over a period of more than 3-4 years, one should use ________.

A. ear-to-year change analysis

B. orizon analysis

C. atio analysis

D. ndex-number trend analysis

View answer

Correct Answer: D

Question #43

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

A. 3,215

B. 2,989

C. 3,244

D. 3,298

E. 3,308

View answer

Correct Answer: A

Question #44

Paul Erdosh is an independent contractor who was hired by Arbitrage Securities to carry out a research project involving the software industry. The scope of the research was broad and the aim was to identify relatively undervalued stocks in that sector. During the course of the research, Paul realized that two of the companies in the sector were prime takeover targets if anyone bothered to do more research on them. He decided to sell this finding to M&A Consultants and obtain a research contract from them.

A. ot violated Standard III (B) - Duty to Employer

B. iolated Standard III (B) - Duty to Employer - because by selling the information to a rival firm, he has potentially harmed Arbitrage Securities' business

C. ot violated Standard III (B) - Duty to Employer - because he is an independent contractor, not an employee of Arbitrage Securities

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

View answer

Correct Answer: A

Question #45

A common size balance sheet shows all quantities as a percentage of ________ while an income statement uses ___________ as the base amount.

A. ales, assets

B. ssets, sales

C. quity, sales

D. ssets, equity

View answer

Correct Answer: B

Question #46

How should the effect of a change in accounting estimate be accounted for?

A. one of these answers

B. y reporting pro forma amounts for prior periods

C. n the period of change and future periods if the change affects both

D. y restating amounts reported in financial statements of prior periods

E. s prior-period adjustments to beginning retained earnings

View answer

Correct Answer: C

Question #47

If you deposit $5,000 today and make an additional deposit of $3,000 in 3 years, how much is in the account 6 years from today, if the money earns interest at 8% per year, compounded annually?

A. 10,077

B. 13,775

C. 17,335

D. 11,713

E. 12,695

View answer

Correct Answer: D

Question #48

A firm has legal cash expenses of 300 and a tax rate of 40. If it chooses to capitalize the costs and depreciated them over 3 years, the operating cash flow under capitalization, compared to that under expensing, will be ________.

A. maller by 220

B. arger by 180

C. arger by 220

D. maller by 180

View answer

Correct Answer: C

Question #49

What must you know to develop a binomial probability distribution?

A. robability of success

B. robability of success and number of trials

C. robability of success and number of successes

D. umber of trials

E. umber of successes

View answer

Correct Answer: B

Question #50

Assuming that an expansionary fiscal policy package could be enacted and implemented immediately, approximately how far in advance would be problem of a lagging economy need to be recognized?

A. -2 years

B. months to 1 year

C. mpossible to determine

D. f policy could be enacted immediately, timing would not be a problem

E. year

View answer

Correct Answer: C

Question #51

An automatic machine inserts mixed vegetables into a plastic bag. Past experience revealed that some packages were underweight and some were overweight, but most of them had satisfactory weight.Weight % of TotalUnderweight 2.5Satisfactory 90.0Overweight 7.5Three packages are selected from the food processing line. What is the probability of selecting and finding that all three of them are underweight?

A. one of these answers

B.

C.

D.

E.

View answer

Correct Answer: D

Question #52

Which of the following represents an investing activity in the statement of cash flows ________.

A. tock dividend

B. urchase of inventory

C. epreciation of plant assets

D. ale of plant assets at a loss

View answer

Correct Answer: D

Question #53

A firm has purchased a building with a useful life of 7 years. It cost $35,000 and its salvage value is estimated at $5,000. If the firm uses double declining method, what's the depreciation expense recognized in Year 2?

A. 9,125

B. 7,143

C. 10,000

D. 6,857

View answer

Correct Answer: B

Question #54

Standard II (B) deals with ________.

A. one of these answers

B. lagiarism

C. se of Professional Designation

D. undamental Responsibilities

E. rofessional Misconduct

View answer

Correct Answer: E

Question #55

Kathy Hurst, CFA, is valuing a 4-year zero coupon security. She is provided the following information:--------------------------------6.0%--------------------------------7.3%?8.9%-------------------------------The 4-year spot rate is 7.5%.Calculate the one-year forward rate two years from now ().

A.

B.

C.

View answer

Correct Answer: B

Question #56

You are examining a group of 6 stocks. Their average annual standard deviations have been 25%, 20%, 15%, 25%, 16%, and 45%. What is the range of annual standard deviations?

A. 5

B. 5

C. 0

D. 9

View answer

Correct Answer: C

Question #57

Which of the following correctly describes how expansionary fiscal policy through tax cuts eventually impacts employment?

A. ax cuts result in more income for consumers, which shifts the aggregate demand curve upward, which increases the price level

B. tax cut shifts the aggregate demand curve out

C. ax cuts result in more government debt which causes the interest rate to rise and therefore unemployment to fall

D. ax cuts result in a multiplier effect, as politicians showing confidence in the economy encourages businesses to spend on expansions

E. he tax cut causes an increase in quantity demand

View answer

Correct Answer: B

Question #58

Which of the following best describes a balance sheet?

A. one of these answers

B. balance sheet reports changes over a period of time in component accounts that comprise the ownership of a firm

C. balance sheet summarizes the financial position of a company at a given point in time

D. balance sheet details the cash inflows and outflows that are related to a company's operating, investing, and financing activities over a period of time

E. balance sheet measures a company's financial performance over a specified period of time

View answer

Correct Answer: C

Question #59

The section of a firm's annual report entitled "Management's Discussion and Analysis" (MD&A)

A. s a technical analysis of past results and a defense of those results of management

B. ncludes the company president's letter

C. overs three financial aspects of a firm's business: liquidity, capital resources, and results of operations

D. overs marketing and product line issues

E. one of these answers

View answer

Correct Answer: C

Question #60

The Pairagain mutual fund has entered into an equity swap with SingleSol, LLC, with a notional principal of $50 million. Pairagain has agreed to pay the quarterly return on the NASDAQ 100 in exchange for a fixed rate of 7.0%. The initial price of the NASDAQ 100 was 1825, and the value at the end of the first quarter, 91 days later, was 1755. The swap uses a 365-day year convention. What is the net payment to be made at the end of the first quarter?

A. ingleSol pays $2,790,411

B. ingleSol pays $1,917,808

C. ingleSol pays $872,603

View answer

Correct Answer: A

Question #61

Which of the following would be a debit in the U.S. balance of payments?

A. short-term loan extended to a Japanese manufacturer by a U

B. he purchase of a Japanese car by an American

C. he purchase of air service from a U

D. he purchase of U

View answer

Correct Answer: B

Question #62

Ned Jones, CFA, manages an endowment fund. The fund's asset allocation includes domestic stocks and bonds, international stocks and bonds, as well as real estate investments. Jones wants to establish an accurate benchmark to compare the fund's performance against. Which of Jones' following statements concerning indexes to be used for benchmarking is least likely correct?

A. he creation of an investment bond index is difficult because of bond pricing issues, and because the universe of bonds is constantly changing

B. orrelations between bond index returns for different countries have tended to be lower than correlations between different bond indexes within a single country

C. overeign bond indexes outside the United States represent after tax returns

View answer

Correct Answer: C

Question #63

Which of the following statements clearly conflicts with the recommended procedures for compliance presented in AIMR's Standards of Practice Handbook?

A. nvestment recommendations may be changed by an analyst without prior approval of a supervisory analyst

B. rior approval must be obtained for the personal investment transactions of all employees

C. or confidentiality reasons, personal transactions should not be compared with those of clients or the employer unless requested by regulatory organizations

D. ersonal transactions should be defined as including transactions in securities owned by the employee and member of his or her immediate family and transactions involving securities in which the employee has beneficial interest

View answer

Correct Answer: C

Question #64

According to Standard IV (B.4), Priority of Transactions, a member is a "beneficial owner" if the member has each of the following, EXCEPT:

A. he power to vote or direct the voting of the shares of the securities or investments

B. he power to dispose or direct the disposition of the security or investment

C. he authority to supervise reasonably and adequately the actions of those accountable to him

D. direct or indirect pecuniary interest in the securities

View answer

Correct Answer: C

Question #65

The deferred income tax account

A. an be reported as an asset

B. s reported as a liability if it has a credit balance

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

D. ll of these answers are correct

View answer

Correct Answer: D

Question #66

In a rebuttal to comments made by Dilbertico's fundamental analyst, Keith Howard states that future changes in stock prices cannot be predicted based on a company's institutional ownership. State which form of the efficient market hypothesis (EMH) Howard's statement supports and also state a type of empirical study which tests that form of the EMH.

A. eak form of the EMH and trading rulestest

B. emistrong form of the EMH and trading rules test

C. emistrong form of the EMH and event study

View answer

Correct Answer: C

Question #67

What monthly payment is required over the next 60 months to pay off a $12,500 debt today, if interest is charged at 12% per year, compounded monthly?

A. 316

B. 270

C. 296

D. 3,467

E. 278

View answer

Correct Answer: E

Question #68

As a general rule, revenue is normally recognized when it is ________.

A. ealizable

B. easurable and received

C. easurable and earned

D. ealizable and earned

View answer

Correct Answer: D

Question #69

James Larson, CFA, manages a large capitalization growth mutual fund. Larson's benchmark is the Russell 1000 Growth index. Larson's colleague, Kevin Moore, CFA, manages an index fund which mimics the Russell 1000 index. Moore believes that the capital markets are fully efficient, while Larson disagrees. Larson defends his position with the following supporting statements.Statement 1:Market participants must be adequately compensated for processing new information to ensure the markets remain efficient. Yet

A. es

B. nly Statement 1 is correct

C. nly Statement 2 is correct

View answer

Correct Answer: B

Question #70

In the Keynesian model, if the marginal propensity to consume were 0.75, an independent decline in investment of $10 billion would cause equilibrium income to decline ________.

A. 40 billion

B. 75 billion

C. 10 billion

D. 50 billion

View answer

Correct Answer: C

Question #71

Ben Click is analyzing an equity security using price-to-earnings, price-to-sales, price-to-book value, and price- to-cash flow ratios. Which statement correctly identifies a drawback of using one of the listed ratios?

A. arning power is a chief driver of investment value

B. ccounting effects may compromise the use of book value

C. ales are generally less subject to distortion or manipulation than are other fundamentals

View answer

Correct Answer: B

Question #72

Institutional Investments is a fund management firm that provides investment advice as well as investment management to large client accounts. I.I.'s senior portfolio manager, Richard Fineman's cousin, Alberto Onestone, runs a small brokerage firm. Fineman has directed all of his junior portfolio managers to execute their trades with Alberto. Alberto's fees are higher than those available from discount brokers but Alberto provides Fineman and his managers a wealth of investment tips that he hears on the str

A. ineman and his managers are violating Standard IV (B

B. , II and III

C. V only

D. I only

E. I and III only

View answer

Correct Answer: D

Question #73

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

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

B. he manager may seek satisfactory price and execution

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

D. one of these answers

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

View answer

Correct Answer: B

Question #74

Which of the following is not a common tool used in financial statement analysis?

A. rend series analysis

B. andom walk analysis

C. ommon size statement analysis

D. atio analysis

View answer

Correct Answer: B

Question #75

According to the AIMR-PPS, terminated portfolios are included in the composite for how long after termination?

A. omposites must include terminated portfolios after the last full performance measurement period the portfolios were under management

B. omposites should include the terminated portfolio only until the date of termination

C. omposites should include the terminated portfolio for the last full performance measurement period under which the portfolios were managed

D. omposites should include the terminated portfolio for the full ten years required by the Standards for performance reporting

View answer

Correct Answer: C

Question #76

A critical part of Standard IV (

A. ) is to distinguish between:

A. uy side and sell side

B. ndustry and company analysis

C. nsider trading and appropriate trading

D. esearch reports and investment memoranda

E. mployees and independent contractors

View answer

Correct Answer: G

Question #77

Contingent losses are recognized:

A. hen they actually occur during a contingency

B. I, III & IV

C. only

D. I & III

E. I & IV

View answer

Correct Answer: A

Question #78

An analyst has stated that, holding all else constant, an increase in the maturity of a coupon bond will increase its interest rate risk, and that a decrease in the coupon rate of a coupon bond will decrease its interest rate risk.The analyst is correct:

A. nly with respect to the effect of the increase in the maturity

B. nly with respect to the effect of the decrease in the coupon rate

C. ith respect to both the effect of the increase in maturity and the effect of the decrease in the coupon rate

View answer

Correct Answer: A

Question #79

Three young children approach a gum ball machine, each with a nickel to spend. The machine has just been filled with 50 black, 150 white, 100 red and 100 yellow balls that have been thoroughly mixed. Sue and Jim approached the machine first. They both said they wanted red gum balls. What is the likelihood they both will get their wish?

A. one of these answers

B.

C.

D.

E.

View answer

Correct Answer: B

Question #80

The unemployment rate of teen-agers is substantially higher than the unemployment rate of prime-age workers primarily because teen-agers

A. re more likely to be in the armed forces and therefore they end up being counted as unemployed

B. re less likely to be in the labor force than older workers since many teenagers are still attending school

C. re less likely to switch jobs and move into and out of the labor force than older workers

D. re more likely to switch jobs and move into and out of the labor force than older workers

E. f they search more diligently, can generally find high-paying jobs that are available only to experienced, highly skilled workers

View answer

Correct Answer: D

Question #81

Which of the following is/are FALSE?

A. nterest expenses that are capitalized are charged against investing cash flows

B. , II & IV

C. I & IV

D. I & III

E. II & IV

View answer

Correct Answer: B

Question #82

Grey recommends the purchase of a mutual fund that invests solely in long-term U.S. Treasury bonds. Hemakes the following statements to his clients:

A. The payment of the bond is guaranteed by the U

B. either statement violated the Code and Standards

C. tatement I and II violated the code and Standards

D. nly statement I violated the Code and Standards

E. nly statement II violated the Code and Standards

View answer

Correct Answer: D

Question #83

Which of the following best describes retained earnings?

A. ll of these answers

B. one of these answers

C. etained earnings represent the cumulative net profits a firm since inception

D. etained earnings represent the sum total of cash obtained from the sale of common stock to investors

E. etained earnings represent the cumulative net profits of a firm since inception, minus cumulative dividends paid to common stockholders

View answer

Correct Answer: E

Question #84

Walter Jennings, a quantitative analyst with Smith, Kleen & Beetchnutty Brokerage, has just been informed of an important error in one of his recent statistical endeavors. Specifically, in one hypothesis test, Mr. Jennings failed to reject a null hypothesis that later was proven to be false. Which of the following best describes this type of error in hypothesis testing? Further, if the confidence level of the test were increased, would the probability of this error increase, decrease, or is this probability

A. ype II error; difficult to determine

B. ype I error; difficult to determine

C. ype I error; decrease

D. ype II error; decrease

E. ype I error; increase

View answer

Correct Answer: A

Question #85

Variable X is distributed normally and has a mean of 10. If the probability that an observation of X will be negative is 0.16, what is the coefficient of variation of X?

A. 0

B.

C.

D.

View answer

Correct Answer: B

Question #86

________ provide a relative measure for the riskiness of a strategy.

A. olatility measures

B. enchmarks

C. ndexes

D. nvestor universes

E. isclosures

View answer

Correct Answer: B

Question #87

If the French franc moves from 8.00 to 7.10 francs to the dollar:

A. he dollar now trades for 0

B. he French franc has depreciated

C. he franc now trades for 7

D. he French franc has appreciated

E. he U

View answer

Correct Answer: D

Question #88

Under the current US GAAP, the treatment of R&D expenses:

A. nderestimates current income and leads to lower taxes

B. only

C. one of these are correct

D. , II & III

E. & II

View answer

Correct Answer: C

Question #89

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

A. one of these answers

B.

C.

D.

E.

View answer

Correct Answer: D

Question #90

Which one of the following will most likely cause a future increase in a country's sustainable level of real output?

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

B. decline in the nation's oil reserves

C. igher marginal tax rates

D. n increase in the national debt

E. n increase in the economy's net investment rate

View answer

Correct Answer: E

Question #91

The ________ elasticity of domestic demand for imports and foreign demand for exports is ______.

A. hort-run; elastic

B. ong-run; inelastic

C. hort-run; unit-elastic

D. one of these answers

E. hort-run; inelastic

View answer

Correct Answer: E

Question #92

Which of the following is NOT a financing cash flow?

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

B. ash used for share repurchase

C. ash received from issuing bonds

D. ash acquired from the sale of a liquid asset

View answer

Correct Answer: D

Question #93

Which of the following factors will cause country A's currency to appreciate relative to the currency of country B, all else equal?

A. has higher income growth

B. I & III

C. one of them

D. , II & III

E. only

View answer

Correct Answer: B

Question #94

The ERISA fiduciary needs to be as prudent as

A. he average investment advisor

B. he average person

C. he average expert

D. one of these answers

View answer

Correct Answer: C

Question #95

What does a coefficient of correlation of 0.70 mean?

A. oefficient of determination is 0

B. lmost no correlation because 0

C. 0% of the variation in one variable is explained by the other

D. oefficient of nondetermination is 0

E. one of these answers

View answer

Correct Answer: A

Question #96

Miller Mining, a calendar-year corporation, purchased the rights to a copper mine on July 1, 1996. Of the total purchase price, $2,800,000 was appropriately allocated to the copper. Estimated reserves were 800,000 tons of copper. Miller expects to extract and sell 10,000 tons of copper per month. Production began immediately. The selling price is $25 per ton. Miller uses percentage depletion (15%) for tax purposes. To aid production, Miller also purchased some new equipment on July 1, 1996. The equipment co

A. 420,000

B. 215,400

C. 105,000

D. 210,000

E. 430,800

View answer

Correct Answer: D

Question #97

Performance results for a portfolio need to be presented with cash, ________ equivalents, or substitute assets.

A. ultiple

B. omposite

C. verage

D. ash

View answer

Correct Answer: D

Question #98

In the direct method statement of cash flows, the primary component of investing cash flow is typically

A. ividend payments

B. ong-term investments in securities

C. apital expenditures for long-term assets

D. epayment of debt

E. nvestments in affiliates

View answer

Correct Answer: C

Question #99

Under an inflationary environment with stable inventories, a firm may change to LIFO from FIFO due to which of the following reason(s)?

A. o allow earnings manipulation

B. , II, III & IV

C. & II

D. & III

E. , III & IV

View answer

Correct Answer: C

Question #100

Which measure of dispersion disregards the algebraic signs (plus and minus) of each difference between Xand the mean?

A. tandard deviation

B. ariance

C. ean deviation

D. ean

E. one of these answers

View answer

Correct Answer: C

Question #101

An increase in the expected future inflation rate will:

A. ove the short-run supply curve to the left

B. ove the short-run supply curve to the right

C. ove the long-run supply curve to the right

D. ove the long-run supply curve to the left

View answer

Correct Answer: A

Question #102

The reason that the translation of foreign subsidiaries will generate discrepancies between the changes in accounts reported on the balance sheet and those reported in the cash flow statement is

A. he change in the exchange rate does not appear on the balance sheet but will appear as a component of cash collections it is not a change resulting from operations

B. he change in the exchange rate appears as part of the balance of accounts receivable on the balance sheet but will not appear as a component of cash collections because it is not a change resulting from operations

C. he change in the exchange rate does not appear on the balance sheet but will appear as a component of cash from financing activities

D. he change in the exchange rate appears as part of the stockholders' equity on the balance sheet but will not appear as a component of cash collections because it is not a change resulting from operations

View answer

Correct Answer: B

Question #103

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

A.

B. one of these answers

C.

D.

E.

View answer

Correct Answer: A

Question #104

A study of the scores on an in-plant course in management principles and the years of service of the employees enrolled in the course resulted in these statistics:Mean test score was 200 with a standard deviation of 40Mean number of years of service was 20 years with a standard deviation of 2 yearsIn comparing the relative dispersion of the two distributions, what are the coefficients of variation (CV)?

A. est 50%, service 60%

B. est 35%, service 45%

C. est 100%, service 400%

D. est 20%, service 10%

E. one of these answers

View answer

Correct Answer: D

Question #105

The Keynesian model indicates that when individuals plan to save more (and spend less), the result may be a (n)

A. ncrease in investment because investment always equals saving

B. ecline in the equilibrium level of income

C. ncrease in the marginal propensity to consume

D. ncrease in equilibrium income by some multiple of the increase in saving

View answer

Correct Answer: B

Question #106

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

A.

B.

C.

D. one of these answers

E.

View answer

Correct Answer: E

Question #107

How much will $3,250 become after 6 years at 8% per year, compounded annually?

A. 5,298

B. 2,039

C. 2,048

D. 5,157

E. 5,180

View answer

Correct Answer: D

Question #108

Armina Stump is a junior portfolio manager on the verge of a promotion at Black Stallion, a strongly bullish fund management firm. Armina reports to Brouster Bragg, who has been with the firm for about 8 years. Brouster has been busy over the past 6 months and has not been able to keep up with account reviews but has complete faith in his subordinate managers. Now that it's time for Armina's promotion, he has been going over her transactions in the past 6 months and has discovered that all her trades are go

A. rmina has violated Standard I - Fundamental Responsibilities by not filing the reports on time

B. and II only

C. I and III only

D. I only

E. , II and III

View answer

Correct Answer: C

Question #109

Corporate directors are governed by the ________. Trustees are governed by the ________.

A. one of these answers

B. common sense doctrine"; business judgment rule

C. usiness judgment rule; Prudent Man Rule

D. usiness judgment rule; "common sense doctrine"

E. common sense doctrine"; Prudent Man Rule

View answer

Correct Answer: C

Question #110

Intraperiod income tax allocation arises because

A. ertain revenues and expenses appear in the financial statements but are excluded from taxable income

B. tems included in the determination of taxable income may be presented in different sections of the financial statements

C. ncome taxes must be allocated between current and future periods

D. ertain revenues and expenses appear in the financial statements either before or after they are included in taxable income

E. one of these answers

View answer

Correct Answer: B

Question #111

Level ________ verification applies to specific composites.

A. I

B. II

C.

D.

E. V

View answer

Correct Answer: A

Question #112

If you buy an item for $500 and agree to pay for it with 24 monthly payments of $24.50, beginning next month, what annual interest rate, compounded monthly, are you being charged?

A.

B. 6

C. 6

D. 1

E. 4

View answer

Correct Answer: C

Question #113

Taxes must be recognized

A. n the same period as when the taxable event occurred

B. n a quarterly basis

C. n the period immediately following the period in which the taxable event occurred

D. n a yearly basis

View answer

Correct Answer: A

Question #114

State the formula for approximating interest rate parity.

A. h - rf = f1 - e0 * e0

B. h + rf = f1 - e0/e0

C. h + rf = f1 + e0/e0

D. h - rf = f1 + e0/e0

E. h - rf = f1 - e0/e0

View answer

Correct Answer: E

Question #115

A sample of size 225 is drawn from a population. The sample mean equals 876 and the variance of the sample equals 5,924. The 85% confidence interval for the population mean is given by:

A. 866

B. 870

C. 868

D. 869

View answer

Correct Answer: C

Question #116

Allen Jackson believes the stock of JMH Corporation is severely overvalued. JMH trades for 12.3 times annualized earnings, but Jackson thinks the multiple should be 8.1 times. In order to take advantage of the expected 35% drop in the price, Jackson decides to establish a short position in JMH stock. Which of the following is Jackson least likely to do in order to establish a short position?

A. orrow the stock from another investor

B. einvest any dividend payments

C. ost margin with his brokerage firm

View answer

Correct Answer: B

Question #117

Which of the following statements about the cash flow statement is/are true?

A. he cash flow statement provides information on the liquidity of the firm

B. & III

C. , II, III & IV

D. , II & III

E. I & IV

View answer

Correct Answer: B

Question #118

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

A. otal return - realized and unrealized gains plus income - should be used

B. , II and III

C. only

D. and III only

E. I and III only

View answer

Correct Answer: C

Question #119

You have a portfolio of two assets, X and Y. The returns of X and Y follow a joint probability function as follows:There is a 25% chance that X will return 16% and Y will return 10%; there is a 60% chance that X will return 9% and Y will return 7%; and there is a 15% chance that Y will return 15% and X will return 5%. Find the covariance of X and Y.

A.

B.

C. 3

D. 1

View answer

Correct Answer: D

Question #120

Sparten, Inc., a plumbing contractor, received a check for $3,000 on June 29 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 Unearned revenue and decrease cash for $500

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

C. ncrease cash and revenue for $3,000

D. ecrease accounts receivable and increase revenue for $2,500

View answer

Correct Answer: B

Question #121

When a firm experiences LIFO liquidation under rising prices, it recognizes:

A. ower COGS and lower cash flows

B. ower COGS and higher cash flows

C. igher COGS and lower cash flows

D. igher COGS and higher cash flows

View answer

Correct Answer: A

Question #122

Which of the following statements is/are correct under the Code and Standards?

A. IMR members are prohibited from undertaking independent practice in competition with their employer

B. I, III and IV only

C. and IV only

D. V only

E. I and III only

View answer

Correct Answer: D

Question #123

The investment community's need for a common, accepted set of guidelines to promote fair representation and full disclosure in every firm's presentation performance results to clients and prospective clients has guided thedevelopment of the

A. IMR Standards for Calculation of Returns

B. IMR Standards of Practice

C. IMR Performance Presentation Standards

D. IMR Performance and Calculation Investment Board

View answer

Correct Answer: C

Question #124

When prices are rising, which of the following inventory valuation methods produces the lowest income tax liability?

A. one of these answers

B. IFO

C. verage cost

D. IFO

View answer

Correct Answer: B

Question #125

You wish to rank n different securities according to the deviation of the market price from your estimate of their intrinsic value. You are curious how many different ways this can come out. The counting method you should use is:

A. he permutation rule

B. he multinomial formula

C. he binomial formula

D. one of these answers is correct

View answer

Correct Answer: D

Question #126

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

A. roceeds from collecting the principal amount of loans

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

C. ll of these answers are correct

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

View answer

Correct Answer: C

Question #127

Bond X carries a rating of BBB-/Baa3. Bond Y has a rating of B/B2. Both bonds are callable after five years, and both bonds mature in ten years. Identify the most accurate statement regarding the credit risk of these bonds. Which bond's value would be most affected by a ratings downgrade, and which bond has the higher default risk?

A. ond X would be more affected by a ratings downgrade, but Bond Y has higher default risk

B. ond Y would be more affected by a ratings downgrade, but Bond X has higher default risk

C. ond X has higher default risk, but both bonds would feel equivalent effects of a ratings downgrade

View answer

Correct Answer: A

Question #128

What simple annual interest rate would cause a $120 deposit to grow to $125 in 6 months?

A. 5%

B.

C.

D.

E.

View answer

Correct Answer: E

Question #129

Under accrual accounting, which of the following is/are correct?

A. evenues are recognized when cash is received

B. I, III & IV

C. & III

D. , II, III & IV

E. & II

View answer

Correct Answer: A

Question #130

Sandy Hart, CFA, is evaluating the possible purchase of an apartment building. As part of her research, Hart found the following data on three comparable properties:The market cap rate that Hart would be willing to pay for the apartment building is closest to:

A.

B.

C.

View answer

Correct Answer: C

Question #131

A cumulative frequency distribution on days absent during a calendar year by employees of a manufacturing company is shown below.Days AbsentCumulative Number of Employees0 - 2603 - 5316 - 8149 - 11612 - 142How many employees were absent fewer than six days?

A. 0

B. 1

C. 6

D. 1

E. one of these answers

View answer

Correct Answer: C

Question #132

If the use of leverage is ________, the performance presented must include the effects of the leverage.

A. andatory

B. ondiscretionary

C. iscretionary

D. ptional

View answer

Correct Answer: C

Question #133

An analyst with Guffman Investments has developed a stock selection model based on earnings announcements made by high P/E stocks. The model predicts that investing in companies with P/E ratios twice that of their industry average that make positive earnings announcements will generate significant excess return. If the analyst has consistently made superior risk-adjusted returns using this strategy, which form of the efficient market hypothesis has been violated?

A. eak form of market efficiency

B. emistrong and weak forms of market efficiency

C. trong, semistrong, and weak forms of market efficiency

View answer

Correct Answer: B

Question #134

Which of the following is a valuable investigation tool for analysis of the collectibility of a firm's receivables?

A. ll of these answers

B. etermining patterns of receivables for peers as a percent of sales

C. n examination of any customer concentrations

D. n analysis of the adequacy of allowances for trade discounts, and returns and allowances

E. n aging schedule

View answer

Correct Answer: A

Question #135

By blindly adopting the ideas and works of others without acknowledgment, you have definitely violated Standard ________. You also may have violated Standard ________ because you may be making recommendations without a reasonable basis.

A. I (A); IV (1)

B. I (A); IV (1)

C. I (A); IV (A

D. I (C); IV (B

E. I (C); IV (A

View answer

Correct Answer: G

Question #136

What monthly payment, beginning next month, would repay a $17,500 car loan over 48 months, assuming your loan has an interest rate of 4.9% per year, compounded monthly?

A. 364

B. 650

C. 953

D. 402

E. 4,923

View answer

Correct Answer: D

Question #137

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

A. ll four quarters

B. one of these answers is correct

C. ,3

D. only

E. ,3,and 4

View answer

Correct Answer: C

Question #138

Which of the following is/are true about the Performance Presentation Standards?

A. member who complies with the mandatory requirements of the PPS but does not follow the recommended requirements can publicly claim compliance with the PPS

B. II only

C. I and III only

D. , II and III

E. and III only

View answer

Correct Answer: D

Question #139

Which of the following is/are true?

A. f P(A or B) = P(A) + P(B), A and B are independentII

B. II only

C. I & III

D. only

E. I only

View answer

Correct Answer: A

Question #140

What is the range of values for a coefficient of correlation?

A. 1

B. nlimited range

C. 3 to +3 inclusive

D. one of these answers

E. to +1

View answer

Correct Answer: A

Question #141

Which of the following is/are true about the definition of "total firm assets" where PPS are concerned?

A. otal assets include non-discretionary as well as discretionary assets

B. , II and III

C. and III only

D. I and III only

E. and II only

View answer

Correct Answer: A

Question #142

If 68% of the observations of a bell-shaped, symmetrical frequency distribution fall between -20 and + 60, the mean and the standard deviation of the distribution are:

A. 0, 20

B. 0, 40

C. 0, 20

D. 0, 40

View answer

Correct Answer: D

Question #143

A firm has net total sales of 16,000 and administrative cash expense of 4,500. It paid taxes in the amount of 2,300 and had an increase in accounts payable of 400. The depreciation expense was estimated at 1,200.Then, the firm's operating cash flow was ________.

A. ,600

B. ,000

C. ,200

D. one of these answers

View answer

Correct Answer: A

Question #144

Which of the following relating to compliance procedures for complying with Standard III (E) is false? The compliance procedures should:

A. one of these answers

B. utline permissible conduct

C. elineate procedures for reporting violations and sanctions

D. esignate a team of outside colleagues to form a review board

E. utline the scope of the procedures

View answer

Correct Answer: D

Question #145

Which of the following is/are assumptions of a linear regression?

A. or every given value of the independent variable, the dependent variable is normally distributed

B. & III

C. I & III

D. II only

E. & II

View answer

Correct Answer: G

Question #146

How many annual deposits of $1,000, beginning next year, would you need to make before you had accumulated $30,000, if the money earns 8% per year, compounded annually? Assume the account begins with a $0 balance.

A. 5

B. 5

C.

D.

E. 1

View answer

Correct Answer: A

Question #147

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

A.

B. 0

C.

D.

E. 0

View answer

Correct Answer: C

Question #148

Which of the following is NOT a change in accounting?

A. hange in accounting principle

B. hange in past accounting error

C. hanging in accounts reporting entity

D. hanging in accounting estimate

View answer

Correct Answer: B

Question #149

If you deposit $10,000 into an account paying 8% per year, compounded semiannually, how much do you have in the account in 10 years?

A. 15,403

B. 21,911

C. 24,800

D. 22,667

E. 25,938

View answer

Correct Answer: B

Question #150

Suppose that stocks A, B, C, and D are independent with respect to their price movement, and have probabilities of increasing of 0.25, 0.50, 0.40, and 0.30. What is the probability that stocks A and C will increase in price, while stocks B and D fail to increase?

A. 1%

B.

C.

D. 0%

View answer

Correct Answer: C

Question #151

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

A. ging

B. ercent of accounts receivable

C. ercent of net sales

D. ll of these answers are correct

View answer

Correct Answer: C

Question #152

A distribution has a mean of 7 and a range of -100 to +50. The distribution is ________.

A. ncomplete

B. ight skewed

C. efective

D. eft skewed

View answer

Correct Answer: D

Question #153

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

A. 75,000

B. 00,000

C. 00,000

D. 00,000

View answer

Correct Answer: B

Question #154

Which of the following statements is correct regarding Standard II (A) Use of Professional Designation?

A. oe Martin passed Level I and Level II of the CFA exams and is scheduled for the next Level III exam

B. ll of these answers are correct

C. oe Martin passed Level I and Level II of the CFA exams and is scheduled for the next Level III exam

D. oe Martin passed Level I and Level II of the CFA exams, but is not scheduled for the next Level III exam

View answer

Correct Answer: C

Question #155

If you buy an item for $475 and agree to pay for it with 24 monthly payments of $22.50, beginning next month, what annual interest rate, compounded monthly, are you being charged?

A. 7

B. 4

C. 2

D. 2

E.

View answer

Correct Answer: C

Question #156

Why do the corporation's directors declare stock dividends?

A. o increase the market value of the company's stock

B. o provide tangible evidence of management's confidence in the company's strong performance

C. o decrease the number of shares outstanding

D. one of these answers is correct

View answer

Correct Answer: B

Question #157

In the regression equation, what does the letter "a" represent?

A. lope of the line

B. intercept

C. ny value of the independent variable that is selected

D. one of these answers

View answer

Correct Answer: B

Question #158

Under a system of fixed exchange rates, which of the following will most likely increase a balance of payments deficit?

A. n increase in foreign-aid grants

B. n increase in foreign-aid grants and expansionary monetary policy, which will drive prices up and interest rates down

C. xpansionary monetary policy, which will drive prices up and interest rates down

D. reduction in income from investments abroad

E. estrictive monetary policy, which will keep prices down and interest rates up

View answer

Correct Answer: C

Question #159

In year 1, the nation of Economica has no government debt, production is at potential, the nominal interest rate is 8.6% and the real rate is 5.2%. In year 2, the nominal rate is 11.1% and the real rate is 6.7%. Which of the following would be most likely to cause such a situation?

A. ederal budget deficit

B. onetary expansion

C. ecession

D. rade surplus

E. ncrease in aggregate supply

View answer

Correct Answer: A

Question #160

Which of the following is/are true about computation of Basic EPS?

A. eacquired shares are excluded from the date of acquisition

B. only

C. I & III

D. & II

E. , II & III

View answer

Correct Answer: A

Question #161

What annual simple interest rate would cause a $105 deposit to grow to $125 in 15 months?

A.

B. 5

C. 0%

D. 3

E. 4

View answer

Correct Answer: B

Question #162

A shoe manufacturer believes inflation will increase dramatically over the next year. What incentives does this create for this firm?

A. he firm will manufacture less, knowing that prices will be higher in the future

B. he firm will respond to demand from retailers, regardless of inflation

C. f inflation is widely expected, it will have no impact on the firm's strategy

D. he firm will want to decrease inventories now because future inventories will be more costly and therefore less profitable

E. he firm will attempt to store shoes in inventory, knowing that in the future these shoes will be worth more

View answer

Correct Answer: E

Question #163

The formula for joint probability is given by:

A. (AB) = P(A | B) * P(A)

B. (AB) = P(A | B) / P(B)

C. (AB) = P(A | B) * P(B)

D. (AB) = P(A | B) / [P(B) * P(A)]

View answer

Correct Answer: C

Question #164

If you buy a television for $650 and agree to pay for it with 24 payments of $30 (with the first payment occurring next month), what is the size of the final payment needed at month 24 to completely pay off the television? Assume the interest rate you are being charged is 16% per year, compounded monthly.

A. 47

B. 0

C. 203

D. 30

E. 51

View answer

Correct Answer: E

Question #165

________ investing is investing with a view toward the social or political statements made by such an investment.

A. one of these answers

B. haritable

C. olitical

D. ocial

View answer

Correct Answer: D

Question #166

A stock has the following returns over 4 years: +5%, -6%, +8%, +3%. The annual arithmetic and geometric rates of return over the 4 years are:

A. %; 5

B.

C. 0%; 9

D.

View answer

Correct Answer: D

Question #167

The expected value of Y is 9 and the expected value of X is 3. If X and Y are uncorrelated and you run a regression of Y against X, the intercept term will equal ________.

A.

B.

C. one of these answers

D.

View answer

Correct Answer: A

Question #168

When compared to a traditional mutual fund, an ETF will most likely offer:

A. etter risk management

B. ess portfolio transparency

C. igher exposure to capital gains distribution taxes

View answer

Correct Answer: A

Question #169

When a firm records a lease as a capital lease:

A. ts working capital increases

B. ts current ratio decreases

C. ts debt-to-asset ratio increases

D. ts financial leverage ratio decreases

View answer

Correct Answer: B

Question #170

You have invested in a stock with a expected return of 14% and a standard deviation of 7%. Your target rate of return is 7%. What is the probability that you will not meet your objective, assuming stock returns are normally distributed?

A. 2%

B. 4%

C. 6%

D. 8%

View answer

Correct Answer: C

Question #171

Oils Galore is a large firm that prefers to use the Successful Efforts method of accounting. A similar firm, Rival Oil & Gas, Inc., uses the Full Cost method. An inspection of their financial statements would reveal that:

A. ils Galore has a higher debt-to-asset ratio

B. & III

C. I & IV

D. II & IV

E. & II

View answer

Correct Answer: D

Question #172

Which of the following is NOT a disclosure requirement for financial instruments?

A. irms must present fair valuations of financial instruments in the financial statements or accompanying notes

B. irm must present reasons for not meeting any of the disclosure requirements

C. irms must disclose the purposes of holding any speculative financial instruments

D. irms must disclose significant assumptions used to value financial instruments

View answer

Correct Answer: C

Question #173

Suppose the lowest-wage state in the U.S. is West Virginia and the highest-wage state is New York. Which of the following would be true?

A. f New York trades with West Virginia, wages in New York will fall until they equal the wages in West Virginia

B. ew York would be better of if its state government imposed restrictions on the importation of goods made in West Virginia

C. oth New York and West Virginia will be better of if they are allowed to trade freely

D. f New York trades with West Virginia, consumers in New York will be worse off

View answer

Correct Answer: C

Question #174

What is the future value of $750 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. 5,364

B. 4,500

C. 5,740

D. 6,209

E. 5,293

View answer

Correct Answer: C

Question #175

A critical part of Standard IV (

A. ) is to distinguish between:

A. esearch reports and investment memoranda

B. nsider trading and appropriate trading

C. FA charterholders and non-CFA charterholders

D. one of these answers

E. mployees and independent contractors

View answer

Correct Answer: H

Question #176

Cornelius is a portfolio manager with Apex Investments, an investment advisory firm. Cornelius has, over the years, developed a special symbiotic relationship with Mike Milken, the owner of Milk 'em, Inc., a small brokerage firm. Cornelius puts subtle pressure on the trading desk at Apex to execute its trades through Milk 'em, thus generating brokerage revenue for Mike. In return, Mike recommends the services of Apex Investments to many of its clients. This arrangement is not disclosed to either the senior

A. ot violated any AIMR standards

B. I, III and IV only

C. I and IV only

D. only

E. I and III only

View answer

Correct Answer: A

Question #177

An analyst uses a temporary supernormal growth model to value a common stock. The company paid a $2 dividend last year. The analyst expects dividends to grow at 15% each year for the next three years and then to resume a normal rate of 7% per year indefinitely. The analyst estimates that investors require a 12% return on the stock. The value of this common stock is closest to:

A. 48

B. 53

C. 71

View answer

Correct Answer: B

Question #178

If your estate were to receive $100 a year, beginning next year, for 100 years, what is the equivalent single amount today that this series of cash flows is equal to, assuming interest is 5% per year, compounded annually?

A. 11,302

B. 10,000

C. 2,041

D. 58

E. 1,984

View answer

Correct Answer: E

Question #179

The results of the regressions using 200 observation on a variable Y against X are as follows:Coefficient Standard errorintercept 3.62.1slope 8.11.3R square = 49%If an observation on X indicates X = 5 the estimated value of Y would be ________.

A. 4

B. one of these answers

C. 6

D. 0

View answer

Correct Answer: A

Question #180

Given:Population 50 millionNumber in the labor force 30 millionNumber employed full time 20 millionNumber employed part time 8 millionNumber unemployed 2 millionWhat is the unemployment rate of the economy?

A. 0

B.

C.

D.

View answer

Correct Answer: D

Question #181

An investment of $100 grows in four years to $345. The investor observes that the annual arithmetic rate of return and the geometric rate of return were the same over this period. The annual arithmetic rate of return must be ________.

A. 0

B. 3

C. 4

D. 7

E. 6

View answer

Correct Answer: E

Question #182

A derivative security pays $100 if the Dow Jones Industrial Average shows a 15% return over the next year and does not pay anything of the return is lower. If the security costs $45 and its expected return is 30%, what's the probability that the Dow Jones return will exceed 15%?

A. 9

B. 8

C. 1

D. 1

View answer

Correct Answer: B

Question #183

Which of the following is/are true about Goodwill?

A. t represents the amount paid for an acquired firm that cannot be identified with tangible assets

B. & III

C. & II

D. I & III

E. , II & III

View answer

Correct Answer: A

Question #184

Marine Corp. uses the direct method to prepare its statement of cash flows. Marine's trial balance at December 31, 1996 and 1995 are as follows:Dec. 31, 1996 Dec. 31, 1995Debits:Cash $35,000 $32,000Accounts receivable 33,000 30,000Inventory 31,000 47,000Property, plant & equipment 100,000 95,000Unamortized bond discount 4,500 5,000Cost of goods sold 250,000 380,000Selling expenses 141,500 172,000General and administrative expenses 137,000 151,300Interest expense 4,300 2,600Income tax expense 20,400 61,200To

A. 535,800

B. 601,800

C. 536,000

D. 541,600

E. 541,800

View answer

Correct Answer: A

Question #185

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

A.

B.

C. one of these answers

D.

E.

View answer

Correct Answer: E

Question #186

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

A. 97

B. 72

C. 142

D. one of these answers

E. 100

View answer

Correct Answer: A

Question #187

A price-linked derivative security pays $300 if the oil price over the next year increases by more than 5%, anevent that can happen with a 60% probability. Otherwise, it pays $50. If the expected return on the security is 15%, how much does the security cost?

A. 174

B. 180

C. 168

D. 191

View answer

Correct Answer: A

Question #188

Pulser Primorak is an investment manager who recently bid in an IPO on behalf of his clients and was allowed to buy 1,000 shares of the issue. What should Primorak do?

A. e should distribute the IPO shares amongst the client accounts over which he has discretionary investment powers on a pro rata basis

B. e should treat all his customers equally and fairly by distributing the IPO shares amongst all his client accounts on a pro rata basis

C. e should distribute the IPO shares amongst all his client accounts for which the IPO is an appropriate investment on a pro rata basis

D. he question is based on a false premise

View answer

Correct Answer: C

Question #189

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

A. n increase in domestic real interest rates

B. igher inflation than one's trading partners and a reduction in domestic real interest rates

C. reduction in domestic real interest rates

D. igher inflation than one's trading partners

E. n increase in exports coupled with a decline in imports

View answer

Correct Answer: B

Question #190

When prices are rising, which of the following inventory valuation methods produces a higher profit?

A. one of these answers

B. IFO

C. IFO

D. verage cost

View answer

Correct Answer: B

Question #191

Under the AIMR Code of Ethics, members shall practice and encourage others to practice in a professional and ethical manner that will reflect credit on members and their ________.

A. amilies

B. mployer

C. ublic contacts

D. rofession

E. one of these answers

View answer

Correct Answer: D

Question #192

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

A. evenue

B. n expense

C. liability

D. n asset

View answer

Correct Answer: B

Question #193

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

A. IMR member

B. ccess person

C. one of these answers

D. nsider

View answer

Correct Answer: B

Question #194

Suppose you are modeling long-term interest rates, and you believe that supply of corporate debt is a major contributing factor. Suppose you believe that the probability that rates will rise if supply of corporate debt rises is 60%; if the supply of corporate debt stays constant, you believe that there is a 35% chance of increasing interest rates; if the supply of corporate debt falls, you believe that there is a 5% chance of rates increasing. You think that the likelihood of corporate debt increasing is 50

A. 5

B. 4

C. 4

D. 5

View answer

Correct Answer: C

Question #195

With regard to real estate, all properties must be included in at least one ________.

A. ccount

B. nvestment type

C. omposite

D. ector

E. ortfolios

View answer

Correct Answer: C

Question #196

Within the AD/AS model, an unanticipated increase in short-run aggregate supply will cause real output to

A. ecline and prices fall

B. ecline and prices rise

C. xpand and prices rise

D. xpand and prices fall

View answer

Correct Answer: D

Question #197

A sample of size 600 is drawn from a population. The sample mean equals 329. The total width of the 99% confidence interval for the population mean is 893. The estimated population variance equals ________.

A.

B.

C.

D.

View answer

Correct Answer: C

Question #198

Jackson, an analyst, decides not to change a recommendation from buy to sell because she wants to sell her holdings first. Is there a standards violation?

A. o

B. es, Standard IV (A

C. es, Standard III (B), Duty to Clients and Prospects

D. es, Standard IV (B

View answer

Correct Answer: D

Question #199

Which of the following is NOT one of the goals of AIMR-PPS?

A. nforce a single standard on the various performance presentations through a mandatory adoption of the PPS

B. one of these answers

C. olster the notion of self-regulation and enhance the professionalism in the industry

D. mprove the service offered to investment management clients

View answer

Correct Answer: A

Question #200

What annual interest rate, compounded annually, would cause a series of 10 deposits of $500 to accumulate to $9,000, if the first deposit is made one year from today?

A. 2

B. 5

C. 1

D.

E. 0

View answer

Correct Answer: A

Question #201

Composite ________ measures represent the consistency of a firm's composite performance results with respect to the individual portfolio returns within a composite.

A. isclosure

B. ee

C. ispersion

D. eviation

E. rror

View answer

Correct Answer: C

Question #202

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

A. erchandise inventory

B. ash

C. ccounts receivable

D. urchase returns and allowances

View answer

Correct Answer: A

Question #203

"Sampling error" refers to:

A. n incorrect selection of a sampling method

B. he standard error of the normal deviates of a sample drawn from a population

C. he difference between a sample statistic and the corresponding population parameter

D. n incorrect usage of a sampling method

View answer

Correct Answer: C

Question #204

What monthly payment, beginning next month, is required over the next 48 months to pay off a $10,000 debt today, if interest is charged at 10% per year, compounded monthly?

A. 253

B. 266

C. 216

D. 270

E. 400

View answer

Correct Answer: A

Question #205

"An erratic monetary policy is the primary sources of business instability and inflation." This view is held by

A. onetarists

B. eynesians

C. lassical economists

D. eoclassical economists

View answer

Correct Answer: A

Question #206

What annual interest rate, compounded quarterly, would cause a series of 30 quarterly deposits of $500 to accumulate to $25,000, if the first deposit is made three months from today?

A.

B. 2

C.

D. 3

E.

View answer

Correct Answer: D

Question #207

What is the Net Present Value of this series of annual cash flows at an interest rate of 12% per year: Year 0:<$30,000>, Year 1: $5,000, Year 2: $8,000, Year 3: $11,000, Year 4 <> are used to indicate a negative number).

A. 951

B. $1,795

C. 1,104

D. $1,077

E. $1,579

View answer

Correct Answer: B

Question #208

Accounting rules differentiate research and development activities from activities not considered research and development. Which one of the following is not considered a research and development activity?

A. eriodic design changes to existing products

B. esting in search of product processing alternatives

C. odification of the design of a process

D. one of these answers

E. aboratory research intended for the discovery of a new product

View answer

Correct Answer: A

Question #209

Firms report payments for capital leases in the cash flow statement

A. nly as financing cash flows

B. artly as operating cash flows and partly as investing cash flows

C. nly as investing cash flows

D. artly as operating cash flows and partly as financing cash flows

View answer

Correct Answer: D

Question #210

An investor has a quarterly compounded required rate of return of 9% per year. How much will he pay for a nine-year ordinary annuity that pays $100 per year?

A. 599

B. 574

C. 592

D. 594

View answer

Correct Answer: C

Question #211

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

A. one of these answers

B. either in note disclosure nor by accrual

C. n note disclosure only

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

E. y accrual for the most likely award

View answer

Correct Answer: C

Question #212

All of the following statements about a member's use of clients' brokerage commissions are true except

A. lient brokerage commissions may be directed to pay for the investment manager's operating expenses

B. lient brokerage commissions should be commensurate with the value of the brokerage and research services received

C. lient brokerage commissions may be used by the member to pay for securities research used in managing the client's portfolio

D. lient brokerage commissions should be used by the member to ensure that fairness to the client is maintained

View answer

Correct Answer: A

Question #213

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

A. 3

B. one of these answers

C. 1

D. 4

E. 10

View answer

Correct Answer: A

Question #214

Stock dividends and stock splits differ in that

A. tock splits are paid in additional shares of common stock, whereas a stock dividend results in replacement of all outstanding shares with a new issue of shares

B. stock dividend results in a decline in the par value per share

C. n a stock split a larger number of new shares replaces the outstanding shares

D. tock splits involve a bookkeeping transfer from retained earnings to the capital stock account

E. one of these answers

View answer

Correct Answer: C

Question #215

Preferred and common stock differ in that

A. ailure to pay dividends on common stock will not force the firm into bankruptcy, while failure to pay dividends on preferred stock will force the firm into bankruptcy

B. ommon stock dividends are a fixed amount, while preferred stock dividends are not

C. referred stock dividends are deductible as an expense for tax purposes, while common stock dividends are not

D. referred stock has a higher priority than common stock with regard to earnings and assets in the event of bankruptcy

E. one of these answers

View answer

Correct Answer: D

Question #216

John makes T-shirts and sells them only to American citizens and he purchases one bottle of French wine with his income. Which of the following will be true?

A. ohn will not be affecting the U

B. ohn will be reducing the U

C. ohn will be adding to the U

D. ohn will be reducing the U

View answer

Correct Answer: C

Question #217

Which of the following are true assumptions underlying linear regression?(1) For each value of X, there is a group of Y values which are normally distributed (2) The means of these normal distributions of Y values all lie on the straight line of regression (3) The standard deviations of these normal distributions are equal

A. ll of them

B. one of them

C. nly (2) and (3)

D. nly (1) and (3)

E. nly (1) and (2)

View answer

Correct Answer: A

Question #218

The following data are available for a firm for a given year:Net Sales 21,896Sales & marketing expenses 4,346Administrative expenses 2,143COGS 10,084Depreciation 967Interest expense 573Tax rate 35%Dividends paid 3,445Preferred Dividends 897Average total equit y37,432Average common equity 26,782Average total liabilities 18,583In the above example, the firm's return on total equity equals ________.

A.

B.

C.

D.

View answer

Correct Answer: C

Question #219

Which of the following is/are true ?

A. ype I error is the event in which we reject the null when it is false

B. I, III & IV

C. I only

D. V only

E. only

View answer

Correct Answer: A

Question #220

Tony Horn, CFA, is evaluating two bonds. The first bond, issued by Kanon Corp., pays a 7.5% annual coupon and is priced to yield 7.0%. The second bond, issued by Samuel Corp., pays a 7.0% annual coupon and is priced to yield 8.0%. Both bonds mature in ten years. If Horn can reinvest the annual coupon payments from either bond at 7.5%, what would his return be on each bond, assuming the bond was held to maturity?

A. reater than 7

B. ess than 7

C. reater than 7

View answer

Correct Answer: A

Question #221

When financing a budget deficit, the government might borrow money from ________.

A. central bank

B. ndividuals

C. ll of these answers

D. usinesses

E. oreigners

View answer

Correct Answer: C

Question #222

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

A. 666

B. 1,207

C. $457

D. 1,313

E. 1,189

View answer

Correct Answer: E

Question #223

Manufacturers were subdivided into groups by volume of sales. Those with more than $100 million in sales were classified as Class A large; those from $50 to $100 million as Class A medium size; and those between $25 and $50 million, and so on. Samples were then selected from each of these groups. What is this type of sampling called?

A. tratified random

B. imple random

C. onvenience

D. one of these answers

E. anel

View answer

Correct Answer: A

Question #224

________ measures, which relate to the total variability of actual returns (i.e. beta), indicate the risk of having returns different from that particular benchmark or index.

A. ndex

B. bsolute

C. olatility

D. isk

View answer

Correct Answer: C

Question #225

A survey of top executives revealed that 35% of them regularly read Time magazine, 20% real Newsweek and 40% read U.S. News & World Report. Ten percent read both Time and U.S. News & World Report. What is the probability that a particular top executive reads either Time or U.S. News & World Report regularly?

A.

B.

C. one of these answers

D.

E.

View answer

Correct Answer: D

Question #226

Which of the following investments in debt securities would not normally be classified as long-term?

A. eld-to-maturity securities

B. rading securities

C. vailable-for-sale securities

D. ll of these answers

E. one of these answers

View answer

Correct Answer: B

Question #227

If the p-value is ________ the significance level, the null hypothesis ________.

A. ess than; can be rejected

B. one of these answers

C. ore than; can be rejected

D. ess than; cannot be rejected

View answer

Correct Answer: A

Question #228

Proctor Ltd. sells major household appliance service contracts for cash. The service contracts are for a 1-year, 2-year, or 3-year period. Cash receipts from contracts are recorded as unearned contract revenues. This account had a balance of $720,000 at December 31, 1996. Service contract costs are charged as incurred to the service contract expense account, which had a balance of $180,000 at December 31, 1996. Outstanding service contracts at December 31, 1996 expire as follows:During 1997 $150,000During 1

A. 475,000

B. one of these answers

C. 295,000

D. 245,000

E. 540,000

View answer

Correct Answer: A

Question #229

Consider the following three investments with annual compounding:Present value years interest rate1.$22,500 56% per year2.$10,000 75% per year3.$15,000 38% per yearThe future values of the 3 investments, at the ends of their investment periods, are:

A. 26,454, $12,067, $17,181

B. 23,850, $10,500, $16,200

C. 30,110, $14,071, $18,896

D. 16,813, $7,107, $11,907

View answer

Correct Answer: C

Question #230

What is the variable used to predict the value of another called?

A. orrelation

B. etermination

C. ependent

D. one of these answers

E. ndependent

View answer

Correct Answer: E

Question #231

One year ago, Yong Kim bought a preferred stock that had a 6% dividend yield. Now, one year later, Kim sells the stock which is how selling at a 5% dividend yield. The preferred stock pays a fixed annual dividend, which Kim received right before selling. What rate of return did Kim realize on his investment?

A. 4%

B. 0%

C. 6%

View answer

Correct Answer: C

Question #232

An EPS amount is always shown for:

A. ll of these answers

B. ncome before extraordinary items and the cumulative effect of accounting changes

C. ncome from continuous operations

D. umulative effect of accounting changes

View answer

Correct Answer: A

Question #233

Carlos recently attended a seminar on a new technique in identifying possible relative mispricings amongst stocks. Impressed by the presentation, he used the technique to suggest that two of his biggest clients rebalance their portfolios with a heavier emphasis on the stocks the technique identified as being mispriced. While presenting this suggestion to his clients, Carlos did not mention anything about the source of the ideas used. Before recommending the changes, he did not personally check the results n

A. iolated Standard II (B) - Professional Misconduct

B. , II and III

C. and III only

D. , II, III and IV

E. I and III only

View answer

Correct Answer: D

Question #234

The following data are taken from the Ultimate Omega's financial statements ending Dec 31, 1985:Increase in inventories 220Stock's repurchased 135Provision for warranty expenses 15Depreciation 90Interest paid 35Outstanding bonds retired 225After-tax gain on bond retirement 25Net Income 430Tax rate 40%What was Ultimate Omega's operating cash flow in 1985?

A. 40

B. 25

C. 05

D. 90

View answer

Correct Answer: D

Question #235

In Keynesian view, the best macroeconomic policy is to:

A. ncrease government investment expenditures during economic booms to offset effects of reduced capacity during the recession to follow

B. egulate aggregate expenditures to match output capacity

C. egulate wages to control inflation and promote full employment

D. ontrol government expenditures to control inflation

View answer

Correct Answer: B

Question #236

When preparing a direct method statement of cash flows, the net cash flow must equal

A. he cash collections minus the cash expenses

B. he cash collections plus the net noncash revenues and expenses

C. he cash flow from operations plus the cash flow from investments

D. he change in cash

E. he cash collections plus the changes in the operating accounts

View answer

Correct Answer: D

Question #237

Radio Corp. owns a leading radio network with 200 million weekly listeners. To combat a declining radio audience, the company has implemented a strategy of targeting the Hispanic audience. After careful analysis, Radio Corp. makes the decision to acquire a Hispanic radio station, rather than convert existing radio stations. The acquisition strategy benefits from rules that allow clustering of ownership of local radio stations. The basis of the strategic initiative and the basis of the acquisition strategy,

A. arket timing and geography

B. ifestyles and technology

C. emographics and regulation

View answer

Correct Answer: C

Question #238

An investor purchased 100 shares of a stock two years ago for $50 per share after deciding the stock would be a good value investment. Since the initial purchase, the stock price has fallen to $35 per share after several of the company's major customers canceled contracts. The investor has decided to purchase another 50 shares at the lower price. Which of the following behavioral biases best characterizes the investor's actions?

A. scalation bias

B. omentum bias

C. verconfidence bias

View answer

Correct Answer: A

Question #239

Standard IV (B.1) clearly states that ________ owe undivided loyalty to their clients and must place client interests before their own.

A. IMR members

B. upervisors

C. one of these answers

D. iduciaries

E. nalysts

View answer

Correct Answer: D

Question #240

Suppose you were given $4,000 today and deposited it into an account paying 8% per year, compounded monthly. If you know that you will need $5,000 in the account 6 years from now, what monthly withdrawal can you make from the account, beginning one month from now, that will leave the account with exactly $5,000 in it in 6 years?

A. 204

B. 15

C. an't be done

D. 123

E. 1

View answer

Correct Answer: B

Question #241

According to Keynesians, which of the following is/are true?

A. ages and prices are flexible and automatically direct an economy toward full employment

B. , II & III

C. II only

D. & II

E. I & III

View answer

Correct Answer: D

Question #242

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

A. hare repurchase

B. nterest paid on new debt

C. osses on debt retirement

D. ividends paid out

View answer

Correct Answer: B

Question #243

A firm has 400 preferred stocks outstanding. It started the year with 900 common stocks and over the year, had the following transactions:Feb 15 Issued 300 common shares.May 1 Redeemed 100 preferred shares.Aug 15 Repurchased 150 common shares.Nov. 30 Issued 400 common shares.In the calculation of EPS, the number in the denominator would be closest to:

A. 440

B. 140

C. 220

D. 540

View answer

Correct Answer: B

Question #244

You have invested in a long-term, fixed deposit account earning 4% per year for 20 years, compoundedannually. Your friend has invested in a similar account but one that earns 4.25% per year, compounded semi- annually. If each of you deposited $5,000, by what amount is your friend wealthier than you due to this deposit?

A. 538

B. 601

C. 639

D. 521

View answer

Correct Answer: C

Question #245

Which of the following can be found in Standard V?

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

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

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

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

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

View answer

Correct Answer: C

Question #246

Which of the following is NOT an objective of the conceptual framework devised by FASB?

A. stablish a logical and coherent system of accounting thought

B. stablish objectives of financial reporting by businesses

C. dentify the characteristics of accounting information that make its disclosure useful

D. nforce a single standard of accounting disclosures across the various industries

View answer

Correct Answer: D

Question #247

What is the critical z-value for a one tailed lower test at the 1% level of risk?

A. 2

B. 2

C. 2

D. one of these answers

E. 2

View answer

Correct Answer: E

Question #248

Extraordinary items are presented on the income statement:

A. et of taxes, separate from income from continuing operations

B. n the footnotes, with the required disclosures

C. s part of income from continuing operations, before taxes

D. one of these answers

View answer

Correct Answer: A

Question #249

The accrual basis of accounting:

A. s used only for taxes reporting purposes

B. ecognizes the development of assets and liabilities externally

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

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 #250

Which of the following revenue recognition methods would generally be considered the most conservative?

A. rder receipt method

B. nstallment method

C. ompletion of production

D. ost recovery method

View answer

Correct Answer: D

Question #251

What deposit today is needed to have $2,000 in 4 years, assuming the money will earn interest at 6% per year, compounded monthly?

A. 1,934

B. 1,290

C. 1,574

D. 1,384

E. 1,900

View answer

Correct Answer: C

Question #252

A population consists of all the weights of all defensive tackles on Sociable University's football team. They are:Johnson, 204 pounds; Patrick, 215 pounds; Junior, 207 pounds; Kendron, 212 pounds; Nicko, 214 pounds; and Cochran, 208 pounds. What is the population standard deviation (in pounds)?

A. bout 4

B. one of these answers

C. bout 40

D. bout 100

E. bout 16

View answer

Correct Answer: A

Question #253

If the use of leverage is ________, the performance presented must include the effects of the leverage.

A. iscretionary

B. andatory

C. ondiscretionary

D. ptional

View answer

Correct Answer: A

Question #254

Standard III (E) is known as ________.

A. rohibition against Use of Material Nonpublic Information

B. reservation of Confidentiality

C. air Dealing

D. rofessional Misconduct

E. nteractions with Clients and Prospects

View answer

Correct Answer: H

Question #255

The Standards state that when presenting material to others, members shall not "copy or use, in substantially the same form as the original, material prepared by another without acknowledging and identifying the name of the author, publisher, or source of such material." The analyst may use information from other sources without acknowledgment, however, if the information:

A. s factual information published in recognized financial and statistical reporting services

B. oes not include a buy or sell recommendation

C. as originally communicated verbally

D. s being reported only to the member's employer or associates

View answer

Correct Answer: A

Question #256

The probability that GNP will expand in the next 12 months is called:

A. n unconditional probability

B. conditional probability

C. joint probability

D. guess

View answer

Correct Answer: A

Question #257

Which of the following could increase outstanding capital stock?

A. onversion of bonds

B. ll of these answers

C. he exercise of stock options

D. he exercise of warrants

E. he payment of stock dividends

View answer

Correct Answer: B

Question #258

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

A. nside information

B. one of these answers

C. reached

D. ecured

E. aterial

View answer

Correct Answer: E

Question #259

You run a mutual fund that holds 24 stocks. Each week, you intend to comprehensively review 3 of them. Assuming this is the first week you are doing this, how many ways can you choose 3 from the 24?

A. ,024

B. ,492

C. ,024

D. ,048

View answer

Correct Answer: A

Question #260

Jamison is a junior research analyst with Howard & Howard, a brokerage and investment banking firm. Howard & Howard's mergers and acquisitions department has represented the Britland Company in all of its acquisitions for the past 20 years. Two of Howard & Howard's senior officers are directors of various Britland subsidiaries. Jamison has been asked to write a research report on Britland. What is the best course of action for her to follow?

A. amison should not write the report because the two Howard officers are constructive insiders

B. amison may write the report but must refrain from expressing any opinions because of the special relationships between the two companies

C. amison may write the report if she discloses the special relationships with the company in the report

D. amison may write the report so long as the officers agree not to alter it

View answer

Correct Answer: C

Question #261

Urvashi Kulkarni is an investment manager with Amritrust Bank, a mid-size investment bank. Urvashi is managing the pension plan assets of Megalith ICs, a maker of cloned integrated chips for PCs. Megalith is planning a take-over of Microchip Corp., a fast-growing rival which recently patented a technology which promises to change the face of chip cloning business. The pension plan assets of Megalith consist of 17% of Microchip's stock. Megalith's management has decided to buy up to 33% of the stock in a ten

A. efuse to follow the directive since she can be held liable under ERISA if she follows directives issued by the plan sponsor

B. efuse to follow the directive since the action is harmful to the pension plan beneficiaries and Urvashi owes fiduciary loyalty to them, not the plan sponsor

C. ollow the management's directive and sell the stock to the general account

D. one of these answers

View answer

Correct Answer: B

Question #262

The "extra" money you take on a trip in case your car breaks down is an example of the

A. ransactions demand for money

B. nflationary demand for money

C. estrictive demand for money

D. peculative demand for money

E. recautionary demand for money

View answer

Correct Answer: E

Question #263

Investments-R-Us is a growing investment advisory firm, which recently hired 5 CFA charter-holders for senior management positions. In an advertisement, the firm promised clients excellent client service and timely investment advice. To bolster this motto, all 5 CFA charter-holders were praised in the advertisement for their commitment, professionalism and high intelligence displayed in passing the CFA program in 3 straight attempts. IRU has

A. iolated the AIMR Presentation Standards by selectively presenting its expertise in the field

B. iolated Standard II (A) - Use of Professional Designation - by implying superior results based on the fact that the CFA charter-holders passed every exam in first attempt

C. one of these answers

D. ot violated any of standards in the AIMR code

View answer

Correct Answer: B

Question #264

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

A. one of these answers

B. 0

C.

D. 0

E. 02

View answer

Correct Answer: E

Question #265

Current liabilities are recorded at ________.

A. heir market value

B. heir present value

C. heir maturity value

D. he lower of cost or market value

View answer

Correct Answer: C

Question #266

Standard III (D), Disclosure of Additional Compensation Arrangements is important because

A. utside arrangements may affect loyalties and objectivity and create potential conflicts of interest

B. one of these answers

C. utside arrangements are not allowed under circumstances

D. hird parties are inherently in competition with the current employer

E. he verbal disclosure requirement allows for "compensation in kind

View answer

Correct Answer: A

Question #267

Which of the following is NOT a form of plagiarism as defined by AIMR code of conduct?

A. opying proprietary software programs without permission

B. sing data from a well-known statistical service without attribution

C. iting specific quotations to "leading analysts," without specific reference

D. sing publicized research reports prepared by others without attribution

View answer

Correct Answer: B

Question #268

"Decision makers systematically err in their forecasts of economic variables." This is implied by which of the following:

A. ational Expectations hypothesis

B. daptive Expectations hypothesis

C. andom Expectations hypothesis

D. onstant Expectations hypothesis

View answer

Correct Answer: B

Question #269

Suppose you need $1,500 in 15 months. How much must you deposit today, if the deposit will earn interest at 8% per year, compounded monthly?

A. 472

B. 1,249

C. 1,357

D. 291

E. 341

View answer

Correct Answer: C

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