Latest CFA Level 1 2024 Mock Exam, Example Questions

Question #1

Portfolios

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

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

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

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

View answer

Correct Answer: C

Question #2

Martina Profis runs a fixed-income portfolio for the pension fund of Whether by Whittaker, Ltd. The portfolio contains a $12 million position in the corporate bonds of Dewey Treadmills. Profis is concerned that interest rates are likely to rise and has calculated that a 50-basis point increase in rates would cause a 4% decline in the Dewey bonds. The dollar duration of the position in Dewey Treadmills is closest to:

A. 96,000

B. 480,000

C. 960,000

View answer

Correct Answer: C

Question #3

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

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

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

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

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

View answer

Correct Answer: D

Question #4

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

A. 's tax payment is higher

B. & IV

C. I & III

D. & III

E. I & IV

View answer

Correct Answer: A

Question #5

If the decision in the hypothesis test of the population correlation is to reject the null hypothesis, what can we conclude about the population correlation?

A. one of these answers is correct

B. s not zero

C. quals the computed sample correlation

D. s zero

E. ould be zero

View answer

Correct Answer: B

Question #6

In the equation Y' - a + bX, what is Y'?

A. lop of the line

B. alue of Y when X=0

C. one of these answers

D. redicted value of Y, given a specific X value

E. intercept

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Correct Answer: D

Question #7

Which of the is/are false?

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

B. I & III

C. , II & III

D. only

E. I only

F. II only

View answer

Correct Answer: B

Question #8

Members can comply with Standard IV (A.1) by undertaking the following:

A. nalyzing basic investment characteristicsII

B. , II & IV

C. I & IV

D. & IV

E. & II

F. I, III & IV

View answer

Correct Answer: A

Question #9

Your distant uncle's will specifies that you will receive a 20-year annuity of $10,000 a year, the payments starting seven years from now. How much is the annuity worth to you today if your discount rate is 4% per year?

A. 107,406

B. 135,903

C. 122,321

D. 110,911

View answer

Correct Answer: A

Question #10

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 #11

Standard V (A) deals with ________.

A. rohibition against Use of Material Nonpublic Information

B. isclosure of Conflicts to Clients and Prospects

C. rohibition against Misrepresentation

D. isclosure of Referral Fees

E. erformance Presentation

F. riority of Transactions

View answer

Correct Answer: A

Question #12

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 #13

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 #14

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 #15

A client tells you that he currently earns $100,000 per year and is comfortable with his lifestyle at that income level. He says he is planning on retiring in 5 years. If inflation averages 8% over the next 5 years, approximately what income level will this client require to maintain his current lifestyle?

A. 147,000

B. ot enough information

C. 169,000

D. 122,000

E. 140,000

View answer

Correct Answer: B

Question #16

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 #17

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

A. 336

B. 677

C. 559

D. 278

E. 531

View answer

Correct Answer: E

Question #18

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

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

B. s g increases, the value of/increases

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

View answer

Correct Answer: C

Question #19

According to the AIMR-PPS, total firm assets are defined to include

A. ll discretionary and nondiscretionary assets, as well as assets underlying overlay investment strategies

B. ll discretionary and nondiscretionary assets

C. ny asset deemed eligible by the firm

D. nly assets underlying overlay investments strategies

View answer

Correct Answer: B

Question #20

The probability of the occurrence of an airplane crash and a successful resolution to a labor strike is called:

A. conditional probability

B. n unrelated probability

C. joint probability

D. n unconditional probability

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Correct Answer: C

Question #21

Jim Boo, CFA, is analyzing Justin Corp., a maker of home appliances. Boo's research provides the following facts:Calculate Justin's expected price to earnings ratio (/).

A.

B. 0

C. 2

View answer

Correct Answer: A

Question #22

One method management can "manipulate" earnings is by

A. eporting a gain on the sale of subsidiary when the operating income of the firm is showing a loss

B. hanging from LIFO to any other inventory valuation method

C. eporting the full amount of anticipated restructuring costs

D. hanging from the percentage-of-completion method

E. eporting additional losses in bad years, assuming future reported profits will increase

View answer

Correct Answer: E

Question #23

Under what condition would a firm report marketable securities as a long-term asset?

A. one of these answers

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

C. hen the value of a firm's investment in marketable securities is less than cost

D. ll of these answers

E. hen a firm maintains excess trading securities

View answer

Correct Answer: B

Question #24

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

A. ation will also experience a balance of trade surplus

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

C. ation's currency must depreciate

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

E. ation's currency must appreciate

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Correct Answer: D

Question #25

Which one of the following will most likely cause a depreciation in the U.S. dollar on the foreign exchange market under a system of flexible exchange rates?

A. sudden increase in the demand for California cabernet wines by Europeans

B. n increase in real interest rates among European nations

C. switch from French stocks and bonds to U

D. ampant inflation in Japan, a major trading partner of the U

View answer

Correct Answer: B

Question #26

Tracy company reports the following in its statement of cash flows:Net Income $1,000Depreciation and Amortization 350Decrease (Increase) in Accounts receivable (10)Decrease (increase) in inventory 200Decrease (increase) in prepaid expenses 80Increase (decrease) in trade payables (300)Increase (decrease) in taxes payable 75Cash Flow from operations 1,395Tracy used the indirect method of determining cash flow from operations (CFO), had they used the direct method

A. FO would have been higher as gains are not deducted in arriving at CFO

B. FO would have been the same

C. t is not possible to determine what CFO would have been without more information

D. FO would have been lower as losses and depreciation are not added back in arriving at CFO

View answer

Correct Answer: B

Question #27

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

A. 210

B. 427

C. 309

D. 515

View answer

Correct Answer: C

Question #28

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

A. one of these answers

B.

C.

D. 0

E.

View answer

Correct Answer: E

Question #29

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

A. 44%%

B. %%

C. %%

D. 2%%

View answer

Correct Answer: A

Question #30

Dilutive warrants are ________ included in the calculation of Diluted EPS.

A. ever

B. ften

C. lways

D. ometimes

View answer

Correct Answer: C

Question #31

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 #32

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

A. 8

B. 8

C. 9

View answer

Correct Answer: C

Question #33

Assume you buy a computer for $1,350 and agree to pay for it with 24 payments of $45, beginning next month. What is the size of the final payment needed at month 24 to completely pay off the computer, if the interest rate you are being charged is 16% per year, compounded monthly?

A. 707

B. 387

C. 494

D. 0

E. 592

View answer

Correct Answer: E

Question #34

A transaction that is unusual in nature and infrequent in occurrence should be reported separately as a component of income

A. fter cumulative effect of accounting changes and after discontinued operations of a segment of a business

B. efore cumulative effect of accounting changes and before discontinued operations of a segment of a business

C. fter cumulative effect of accounting changes and before discontinued operations of a segment of a business

D. efore income from continuing operations

E. efore cumulative effect of accounting changes and after discontinued operations of a segment of a business

View answer

Correct Answer: E

Question #35

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

A. stablish reporting and prior-clearance requirements

B. nsure that procedures will be enforced

C. onsider special situations

D. ontain disciplinary procedures

E. efine personal transactions, investment and prohibited transactions

F. aximize the number of access persons

View answer

Correct Answer: F

Question #36

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

A. /5

B. /15

C. /4

D. /15

E. one of these answers

View answer

Correct Answer: D

Question #37

What degree of relationship do values of the correlation coefficient (r) with magnitudes close to 1.00 indicate?

A. eak

B. trong

C. oderate

D. one

View answer

Correct Answer: B

Question #38

The following data are available for a firm for a given year:Net Sales 21,896Sales & marketing expenses 4,346Administrative expenses 2,143COGS 10,084Depreciation 967Interest expense 573Tax rate 35%Dividends paid 3,445Preferred Dividends 897Average total equity 37,432Average common equity 26,782Average total liabilities 18,583In the above example, the firm's net profit margin equals ________.

A.

B.

C.

D.

View answer

Correct Answer: D

Question #39

According to the hierarchy of accounting qualities, which of the following is considered a pervasive constraint?

A. imeliness

B. enefits versus costs

C. erifiability

D. onservatism

E. elevance

View answer

Correct Answer: B

Question #40

Standard III includes which of the following?

A. erformance Presentation

B. ll of these answers

C. one of these answers

D. easonable Basis and Representations

E. isclosure of Additional Compensation Arrangements

F. se of Professional Designation

View answer

Correct Answer: E

Question #41

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

A. emand curve shifts upward, interest rate falls

B. emand curve shifts upward, interest rate increases

C. uantity demanded increases, interest rate falls

D. emand curve does not change, interest rate increases

E. uantity demanded decreases, interest rates rise

View answer

Correct Answer: A

Question #42

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

A. tandard II

B. tandard IV

C. one of these answers

D. tandard I

E. tandard V

F. tandard III

View answer

Correct Answer: A

Question #43

Tran Holten, 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. Holten rejected a null hypothesis that later was proven to be true. 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 remain unchanged?

A. ype I error; decrease

B. ype I error; increase

C. ype II error; decrease

D. ype I error; remain unchanged

E. ype II error; remain unchanged

F. ype II error; increase

View answer

Correct Answer: A

Question #44

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

A. evenues are recognized when cash is received

B. only

C. I & III

D. II only

E. ll of these answers are correct

View answer

Correct Answer: A

Question #45

Under a periodic inventory system, how is COGS determined?

A. nding inventory is counted and subtracted from beginning inventory

B. ost of goods sold is accumulated as sales are made

C. one of these answers is correct

D. he cost of ending inventory is subtracted from costs of goods available for sale

View answer

Correct Answer: D

Question #46

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

A. ampling error

B. oint estimate

C. tandard error of the mean

D. one of these answers

E. nterval estimate

View answer

Correct Answer: A

Question #47

An EPS amount is always shown for:

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

B. ncome from continuous operations

C. umulative effect of accounting changes

D. ll of these answers are correct

View answer

Correct Answer: D

Question #48

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

A. 2

B.

C.

D. one of these answers

E.

View answer

Correct Answer: B

Question #49

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

A. uaranteed investment contract assets

B. onvertible securities

C. nternational assets

D. ssets managed to more than one base currency

View answer

Correct Answer: A

Question #50

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

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

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

C. igher marginal tax rates

D. decrease in the economy's net investment rate

View answer

Correct Answer: B

Question #51

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

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

B. one of them

C. , II and III

D. and III only

E. II only

View answer

Correct Answer: D

Question #52

A coefficient of skewness of +2.48 indicates:

A. ll of these answers are correct

B. he mean is larger than the median

C. he tail of the distribution is to the right

D. one of these answers are correct

E. large positive skewness

View answer

Correct Answer: A

Question #53

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

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

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

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

D. one of these answers

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

View answer

Correct Answer: C

Question #54

Neeson Pacino is the senior vice president in the corporate finance ARM of Hindenberry Brokerage. Neeson was recently approached by Curare Creators, a pesticide manufacturer. Curare would like to offer new equity to raise capital and has provided Neeson with its current balance sheet and details about the pending projects. Neeson carefully goes over the numbers with a couple of project managersat Curare and also two of his analysts at Hindenberry. He concludes from these discussions that the numbers present

A. iolated Standard IV (1) - Reasonable Basis & Representations

B. iolated Standard IV (3) - Fair Dealing

C. iolated Standard IV (B

D. iolated Standard II (B) - Duty to the Employer

View answer

Correct Answer: A

Question #55

Which of the following are operating cash flows?

A. nterest receivedII

B. , II, III & IV

C. , II & IV

D. & III

E. , II & III

View answer

Correct Answer: D

Question #56

Which of the following is usually not a feature of cumulative preferred stock?

A. as priority over common stock with regard to assets

B. as priority over common stock with regard to earnings

C. one of these answers

D. as the right to receive dividends in arrears before common stock dividends can be paid

E. as voting rights

View answer

Correct Answer: E

Question #57

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 #58

When formulating an investment policy for a client, which of the following falls under "investor objectives?"

A. nvestable funds

B. ime horizon

C. isk tolerance

D. roxy voting

E. iquidity needs

F. one of these answers

View answer

Correct Answer: C

Question #59

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

A. 5

B. one of these answers

C. 5

D. 6

View answer

Correct Answer: C

Question #60

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

A.

B.

C.

D.

E. 2

F.

View answer

Correct Answer: B

Question #61

Why is book value per share important?

A. ecause it is frequently used in assessing merger terms

B. ll of these answers

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

D. one of these answers

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

View answer

Correct Answer: A

Question #62

Given the following points: (-2, 0), (-1,0), (0,1), (1, 1) and (2, 3) What is the critical value necessary to determine a confidence interval for a 95% level of confidence?

A.

B. one of these answers

C.

D.

E.

View answer

Correct Answer: C

Question #63

Float refers to:

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

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

C. he receivable balance on the books of the corporation

D. hecks issued but not yet paid by a bank

View answer

Correct Answer: D

Question #64

Standard III (C) is ________.

A. esponsibilities of Supervisors

B. one of these answers

C. uty to Employer

D. isclosure of Conflicts to Employer

E. isclosure of Additional Compensation Arrangements

F. bligation to Inform Employer of Code and Standards

View answer

Correct Answer: D

Question #65

________ 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 #66

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

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

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

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

View answer

Correct Answer: B

Question #67

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

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

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

C. one of these answers

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

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

View answer

Correct Answer: A

Question #68

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

A. he multinomial formula

B. he multiplication rule

C. he binomial formula

D. one of these answers is correct

View answer

Correct Answer: D

Question #69

A firm's operating cash flow is overstated by 90. Its non-cash expenses were correctly stated, noncash revenues were overstated by 55 and a total of 35 went into reducing outstanding current debt. The firm's tax rate is 40%. Then, the firm's net income is ________.

A. verstated by 55

B. verstated by 20

C. nderstated by 55

D. orrectly stated

View answer

Correct Answer: D

Question #70

The Statement of Stockholders' Equity does not report

A. ny minimum pension liability

B. ny cumulative impact on prior period earnings

C. he investment of the owners in the firm

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

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

View answer

Correct Answer: B

Question #71

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

A. ncreasing interest rates

B. & III

C. , II, III & IV

D. , II & III

E. I & III

View answer

Correct Answer: D

Question #72

Standard IV (B.8) deals with ________.

A. rohibition against Use of Material Nonpublic Information

B. reservation of Confidentiality

C. one of these answers

D. rohibition against Misrepresentation

E. isclosure of Referral Fees

F. isclosure of Conflicts to Clients and Prospects

View answer

Correct Answer: E

Question #73

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

A. he inventory value cannot exceed the net realizable value

B. & III

C. , II & III

D. I only

E. I & III

View answer

Correct Answer: A

Question #74

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

A.

B.

C.

D.

View answer

Correct Answer: D

Question #75

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 #76

Brad Rich uses an investment strategy that assumes stock prices will not reflect quarterly earnings surprises as quickly as suggested by the efficient market hypothesis. Rich believes stocks will earn positive abnormal rates of return over the six months following an earnings surprise. Which form of the efficient market hypothesis would this violate?

A. one

B. eak form only

C. emistrong and weak forms only

View answer

Correct Answer: C

Question #77

Samson Corp. needs to raise $100 million. Delilah Jones, CFA, the Treasurer of Samson, is considering two alternative sources of financing:Alternative 1:Selling a large portion of the company's accounts receivable to a separate entity established solely for this purpose. This entity would then seek to obtain a higher credit rating than Samson's own BB rating, to reduce the required coupon rate on the bond issue.Alternative 2:Issuing bonds, but simultaneously entering into an equity swap so that coupon payme

A. oth alternatives are structured notes

B. lternative I is a structured note, and alternative 2 is a special purpose vehicle

C. lternative 1 is a special purpose vehicle, and alternative 2 is a structured note

View answer

Correct Answer: C

Question #78

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

A. 200,000

B. 166,667

C. 600,000

D. 500,000

View answer

Correct Answer: D

Question #79

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 #80

The par value of a common stock represents

A. he estimated market value of the stock when it was issued

B. one of these answers

C. he liability ceiling of a shareholder when a company undergoes bankruptcy proceedings

D. he total value of the stock that must be entered in the issuing corporation's records

E. he amount that must be recorded on the issuing corporation's record as paid-in capital

View answer

Correct Answer: C

Question #81

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 #82

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

A. s optional but normally included in the annual report

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

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

D. s required by the SEC

View answer

Correct Answer: D

Question #83

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

A.

B.

C.

D.

E. %

View answer

Correct Answer: B

Question #84

A financial auditor's report is required to:

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

B. & IV

C. , III & IV

D. , II & III

E. I & III

View answer

Correct Answer: D

Question #85

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

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

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

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

View answer

Correct Answer: B

Question #86

Six-month LIBOR is an interest rate which:

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

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

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

View answer

Correct Answer: A

Question #87

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

A. one of these answers

B. 7

C. 14

D. 9

E. 9

View answer

Correct Answer: D

Question #88

Anabella Marconi is a junior industry analyst with Trackstar Blue, an investment advisory service firm. She has been assigned to follow 3 different firms in the telecommunication industry and reports directly to the senior manager, Constantine Naples. Constantine manages 9 other analysts and has to frequently visit Trackstar's other offices around the country. Recently, Anabella received a "friendly tip" from her friend, Socorro Shue, who works for Quicktel Com, one of the firms that Anabella is following.

A. nabella has not violated any AIMR code but Constantine has violated Standard III (E) - Responsibilities of Supervisors

B. II and IV only

C. I and IV only

D. V only

E. only

View answer

Correct Answer: C

Question #89

What monthly payment is required over the next 48 months to pay off a $10,000 debt today, if interest ischarged at 14% per year, compounded monthly?

A. 366

B. 250

C. 104

D. 273

E. 116

View answer

Correct Answer: D

Question #90

An automobile manufacturer makes 2 different chassis, each of which can have 3 different body types and 8 colors. How many different looking cars can be made with these choices?

A. 0

B. 4

C. 3

D. 8

View answer

Correct Answer: D

Question #91

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 #92

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

A. reversing entry

B. n opening entry

C. n adjusting entry

D. closing entry

View answer

Correct Answer: C

Question #93

Which of the following is not true about monetary policy?

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

B. onetary policy can only serve to decrease economic volatility

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

D. ithout interference, the money supply would remain constant

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

View answer

Correct Answer: D

Question #94

The interest expense on a discount bond _______ over time.

A. ecreases

B. emains constant

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

D. ncreases

View answer

Correct Answer: D

Question #95

When dealing with a trust, according to the Prudent Man Rule, trustees must:

A. pply "all reasonable efforts" to the remaindermen

B. e impartial between income beneficiaries and remaindermen

C. ake into account income beneficiaries first, then the remaindermen

D. ake into account the remaindermen first, then the income beneficiaries

E. pply "all reasonable efforts" to the income beneficiaries

View answer

Correct Answer: B

Question #96

The goal of an ideal inflation policy would be

A. ocusing on unemployment first

B. inimizing average inflation

C. eeping inflation stable

D. rowing the money supply at a constant rate

E. riving the price level higher

View answer

Correct Answer: C

Question #97

A researcher has a sample of 400 observations from a population whose standard deviation is known to be 136. The mean of the sample is calculated to be 17.2. The null hypothesis is stated as Ho: mean = 4. The p- value under the alternative hypothesis H1: mean > 4 equals ________.

A.

B.

C.

D.

View answer

Correct Answer: D

Question #98

The "Treasury Stock" method of calculating EPS involves:

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

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

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

D. onsidering repurchase of shares at the highest market price

View answer

Correct Answer: B

Question #99

Standard IV (A.3) relates to two major components and is titled ________ and Objectivity.

A. one of these answers

B. mpartiality

C. ustice

D. utonomy

E. ndependence

View answer

Correct Answer: E

Question #100

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 #101

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

A. he intercept term is zero

B. II only

C. V only

D. I & IV

E. II & IV

F. I only

View answer

Correct Answer: E

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