Updated CFA Level I Exam Dumps – Your Path to Success

Question #1

An analyst is evaluating a European call option with a strike price of 25 and 219 days to expiration. The underlying stock is currently trading for $29, and the analyst thinks that by the option expiration date the stock will be valued at $35. If the risk-free rate is 4.0%, what is the lower bound on the value of this option?

A. 0

B. 4

C. 4

View answer

Correct Answer: C

Question #2

The following is a distribution of monthly commissions:Monthly Commissions Class Frequencies$600 - $7993$800 - $9997$1,000 - $1,19911$1,200 - $1,39922$1,400 - $1,59940$1,600 - $1,79924$1,800 - $1,9999$2,000 - $2,1994Referring to the table above, what is the relative frequency of those salespersons that earn more than $1,599?

A. 5

B. one of these answers

C. 9

D. 7

E. 0

View answer

Correct Answer: E

Question #3

According to the FASB conceptual framework, which of the following situations violates the concept of reliability?

A. inancial statements include property with a carrying amount increased to management's estimate of market value

B. one of these answers

C. inancial statements are issued 9 months late

D. ata on segments having the same expected risks and growth rates are reported to analysts estimating future profits

E. anagement reports to stockholders regularly refer to new projects undertaken, but that financial statements never report project results

View answer

Correct Answer: A

Question #4

On a very hot summer day, 5 percent of the production employees at Midland States Steel are absent from work. The production employees are to be selected at random for a special in depth study on absenteeism. What is the probability of selecting 10 production employees at random on a hot summer day and finding that none of them are absent?

A.

B.

C.

D.

E. one of these answers

View answer

Correct Answer: A

Question #5

The AIMR Performance Presentation Standards require that firms report, at a minimum, ________ years of performance to claim compliance with the standards.

A. ne

B. ifteen

C. ive

D. en

E. even

View answer

Correct Answer: D

Question #6

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

A. hen income is recognized as earned

B. ow assets are measured

C. ll of these answers are correct

D. hen expenses and losses accrue

E. hen liabilities are incurred

View answer

Correct Answer: C

Question #7

Which of the following is / are true?

A. he mean deviation can never be negative

B. only

C. & II

D. , II & III

E. II only

View answer

Correct Answer: B

Question #8

Termite Terminators has a debt-to-equity ratio of 50%. The equity consists of 80,000 common stock, valued at the year-end at 65. The preferred equity consists of 30,000 shares of par value 25 and coupon of 6%. The debt carries a coupon rate of 8%. During the year, Termite earned 1.2 million and had an average stock price of 75. It also has 40,000 warrants attached to the debt, each exercisable at 68. Termite's reported Diluted EPS shouldbe:

A. 4

B. 3

C. 5

D. 5

View answer

Correct Answer: B

Question #9

NL is a country with no securities laws. LS is a country that has securities laws that are less strict than the AIMR code of ethics while MS has securities laws that are stricter than the code of ethics. A securities trader lives in MS but conducts his business in LS. His behavior is governed by MS laws. However, the MS law states that the applicable business laws are the local laws where the business is conducted. In that case, the trader must adhere to:

A. S business laws

B. IMR code

C. S business laws

D. combination of MS and LS business law

View answer

Correct Answer: B

Question #10

A cash flow statement using the indirect method

A. s as informative as using the direct method

B. egins with a firm's cash collections

C. ses major categories of gross cash receipts and payments

D. rovides little new information into a firm's cash-generating ability

View answer

Correct Answer: D

Question #11

When individuals are unemployed because they lack the qualifications to fill available jobs, we call this a form of

A. atural unemployment

B. rictional unemployment

C. tructural unemployment

D. yclical unemployment

View answer

Correct Answer: C

Question #12

Which of the following is not a financing activity in the statement of cash flows?

A. epurchase of common stock

B. ssuance of new debt

C. ayment of interest on debt

D. ash dividend

View answer

Correct Answer: C

Question #13

Which of the following is not a current asset?

A. ccumulated Depreciation

B. llowance for Uncollectible Accounts

C. otes Receivable

D. repaid Insurance

View answer

Correct Answer: A

Question #14

A random variable with a mean equal to 6.0 and a standard deviation of 1.5 has a coefficient of variation equal to ________.

A.

B. ero

C.

D.

E. one of these answers

View answer

Correct Answer: A

Question #15

Standard III (C) deals with conflicts of interest of a member with ________.

A. ther investment professionals

B. one of these answers

C. he client

D. olleagues at the same firm

E. he investing public

View answer

Correct Answer: B

Question #16

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 #17

Fundamental Responsibilities is dealt with under:

A. tandard I

B. tandard III

C. one of these answers

D. tandard V

E. tandard II

View answer

Correct Answer: A

Question #18

Items reported as prior-period adjustments

A. o not include the effect of a mistake in the application of accounting principles as this is accounted for as a change in accounting principle rather than a prior-period adjustment

B. o not affect the presentation of prior-period comparative financial statements

C. re reflected as adjustments of the opening balance of the retained earnings of the earliest period presented

D. one of these answers

E. o not require further disclosure in the body of financial statements

View answer

Correct Answer: C

Question #19

In the Keynesian aggregate expenditure model, the larger the marginal propensity to consume,

A. ore consumption expands as the result of a decline in investment

B. reater the marginal propensity to save

C. he smaller the multiplier

D. reater the change in income derived from a given change in private investment

View answer

Correct Answer: D

Question #20

A stock has the following returns over 3 years: +2%, +15%, +25%. The annual geometric rate of return over the three years is ________.

A.

B. 9

C. 1

D.

E. 2

View answer

Correct Answer: H

Question #21

Two events, A and B, are mutually exclusive if:

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

B. (A and B) = 0

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

D. (A and B) = 1

View answer

Correct Answer: B

Question #22

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

A. he three conventional level of confidence are 0

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

C. he confidence level is typically equal to (1 - the probability of a Type II error)

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

E. he confidence level is equal to the significance level

View answer

Correct Answer: F

Question #23

Which of the following statements is NOT true relating to Standard IV (B.3) - Fair Dealing?

A. his standard covers the conduct of two groups: those who prepare recommendations and those who take investment action

B. embers shall deal equally and objectively with all clients

C. nly through the fair treatment of all parties can the investment management profession maintain the confidence of the investing public

D. one of these answers

E. his standard covers investment action such as general purchases, new issues, or secondary offerings

View answer

Correct Answer: B

Question #24

What is the distribution with a mean of 0 and a standard deviation of 1 called?

A. inomial probability distribution

B. one of these answers

C. requency distribution

D. -score

E. tandard normal distribution

View answer

Correct Answer: E

Question #25

Suppose you were given $10,000 today and deposited it into an account paying 10% per year, compounded monthly. If you know that you will need $5,000 in the account 5 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 5 years?

A. 147

B. 83

C. 1,066

D. 140

E. 1,001

View answer

Correct Answer: A

Question #26

What is the Net Present Value of this series of annual cash flows at an interest rate of 12% per year: Year 0:<$14,000>, Year 1: $5,000, Year 2: $4,000, Year 3: $5,000, Year 4 are used to indicate a negative number).

A. $379

B. 114

C. $77

D. 51

E. $245

View answer

Correct Answer: E

Question #27

The following three bonds are available for purchase:Bond X: Noncallable, accelerated sinking fundBond Y: Nonrefundable, callable, accelerated sinking fundBond Z: Noncallable, no sinking fundBased only on the characteristics listed above and the most likely effect of those characteristics on yield, identify the correct order for these three bonds, from highest yield to lowest yield.

A. ond X; Bond Z; Bond Y

B. ond Y; Bond Z; Bond X

C. ond Y; Bond X; Dond Z

View answer

Correct Answer: C

Question #28

Level ________ verification assures that all of the firm's actual, discretionary, fee-paying portfolios are included in at least one composite.

A.

B. I

C. V

D.

E. II

View answer

Correct Answer: D

Question #29

Two newly hired fixed income analysts are debating the merits of federal agency backed mortgage securities, specifically mortgage passthroughs and collateralized mortgage obligations (CMOs). Analyst A and Analyst B make the following statements:Analyst A:Investors in mortgage pass-through securities backed by one mortgage pool have equal exposure to prepayment risk, whereas investors in the CMOs of one pool have different exposures to prepayment risk. Analyst B:Investors in CMOs have greater protection agai

A. nly Analyst A is correct

B. nly Analyst B is correct

C. either analyst is correct

View answer

Correct Answer: A

Question #30

Which of the following is/are true about "compensating balances?"

A. hey are reserve balances maintained for emergency spending requirements

B. I only

C. & III

D. , II & III

E. I & III

View answer

Correct Answer: D

Question #31

Which of the following statements is true?

A. ecognition is concerned with recognizing a liability from a current cash receipt

B. he Accrual process would reduce an asset that is recorded as a result of a cash payment

C. ealization is the process of converting non-cash resources and rights into money

D. ll of these are true

E. llocation is the process of formally recording or incorporating an item in the financial statements of an entity

View answer

Correct Answer: C

Question #32

The correction of an error in the financial statements of a prior-period should be reported, net of applicable income taxes, in the current

A. one of these answers

B. ncome statement after income from continuing operations and after extraordinary items

C. ncome statement after income from continuing operations and before extraordinary items

D. etained earnings statement after net income but before dividends

E. etained earnings statement as an adjustment of the opening balance

View answer

Correct Answer: E

Question #33

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 #34

The monthly compounded rate is 15% quoted on an annualized basis. The equivalent quarterly compounded rate is:

A. 5

B. 5

C. 5

D. 4

View answer

Correct Answer: A

Question #35

Sweetwater & Associates write weekend trip insurance at a very nominal charge. Records show that the probability that a motorist will have an accident during the weekend and file a claim is 0.0005. Suppose they wrote 400 policies for the coming weekend, what is the probability that exactly two claims will be filed?

A.

B.

C.

D.

E. one of these answers

View answer

Correct Answer: A

Question #36

An investment recommendation can be disseminated to clients via each of the following methods, EXCEPT:

A. hrough a brief update report

B. y addition to a recommended list

C. y oral communication

D. hrough an initial detailed research report

E. y deletion from a recommended list

View answer

Correct Answer: F

Question #37

All of the following are often characteristics of intangible assets except:

A. hey are often non-separable from a company

B. he value of the assets portrayed in the financial statements tends to increase for companies performing a lot of R&D

C. hey have indefinite benefit periods

D. hey experience large valuation changes based on competitive circumstances

View answer

Correct Answer: B

Question #38

A firm's treasurer estimates that the firm will need about $15 million in 3 years' time to allow the acquisition of a growing software firm. If the firm can invest in the capital market at the risk-free rate of7% per year and wants to make sure it has the necessary funds available in 3 years, how much does it need to invest today?

A. 12

B. 11

C. 12

D. 13

View answer

Correct Answer: A

Question #39

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

A. ultiplying net sales on account times the percentage

B. ultiplying total sales on account times the percentage

C. ubtracting the percentage of net sales on account from the balance of Allowance for Uncollectible Accounts

D. ividing total sales on account by the percentage

View answer

Correct Answer: A

Question #40

Which of the following is not a current liability?

A. llowance for Uncollectible Accounts

B. ages Payable

C. nearned Revenue

D. otes Payable

View answer

Correct Answer: A

Question #41

Jefferson Blake invests only in bonds and other fixed-income securities. Blake believes there is a good opportunity to purchase an undervalued 4% annual pay corporate bond with three years left until maturity and a par value of $1,000. Blake observes that 1-year, 2-year, and 3-year Treasury strip rates are currently 4.0%, 4.5%, and 4.75%, respectively. What is the maximum price Blake should be willing to pay for the bond?

A. 1,069

B. 979

C. 958

View answer

Correct Answer: B

Question #42

In an open economy, the market demand for domestic products is

A. verstated by the horizontal sum of the domestic and foreign demand

B. he horizontal sum of domestic and foreign demand

C. nderstated by the horizontal sum of the domestic and foreign demand

D. he vertical sum of domestic and foreign demand

View answer

Correct Answer: B

Question #43

Trading securities are carried on the books at ________.

A. urrent market value

B. cquisition cost or current market value

C. cquisition cost

D. ower-of-cost-or-market

View answer

Correct Answer: A

Question #44

The semiannually compounded rate is 6% quoted on an annualized basis. The equivalent quarterly compounded rate is:

A.

B.

C.

D.

View answer

Correct Answer: C

Question #45

If you deposit $1,202.50 into an account paying 6% per year simple interest, how much interest will you have earned in 2 years?

A. 124

B. 126

C. 120

D. 112

E. 144

View answer

Correct Answer: E

Question #46

Which of the following would be considered an automatic stabilizer?

A. ederal Reserve policyII

B. , III

C. one of these answers is correct

D. I, III

E. , II, III

View answer

Correct Answer: B

Question #47

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 #48

If a company fails to record a material amount of depreciation in a previous year, this is considered

A. n accounting error

B. change in estimate

C. n unusual item

D. change in accounting principle

View answer

Correct Answer: A

Question #49

The exchange rate of a country's currency will ________ if the income of the country and its trading partners rises.

A. either of these answers

B. ncrease

C. his answer depends on which income rises the fastest: for countries that are similar in size and propensity to import, the country that is growing the fastest will increase its demand for imports relatively more than its trading partner, resulting in a decrease in the value of the more rapidly growing nation's currency

D. ecrease

View answer

Correct Answer: C

Question #50

If the U.S. is viewed by foreigners as a great nation in which to invest, generating a large inflow of foreign investment, this will cause the U.S. to run a

A. eficit on the official reserve account

B. eficit on the capital account

C. eficit on the current account

D. urplus on the current account

View answer

Correct Answer: C

Question #51

To examine the trends over time within a single firm or compare firms of different sizes, you should use:

A. alance-sheet analysis

B. ommon industry analysis

C. ommon-size statements

D. ash flow analysis

View answer

Correct Answer: C

Question #52

A firm has 1,000 common shares valued at 30 each outstanding. It has also issued 500 preferred shares of face value 100 and a coupon of 5% and a debt of 50,000 with a coupon rate of 6%. The firm's net income after taxes is 14,300. Then, the EPS reported by the firm is ________.

A.

B. 1

C. 4

D.

View answer

Correct Answer: B

Question #53

What sample statistic is used to estimate a population value?

A. one of these answers

B. oint estimate

C. arameter

D. nterval estimate

E. ampling error

View answer

Correct Answer: B

Question #54

Which of the following groups will have seniority in the event of bankruptcy of a company?

A. ll have same seniority

B. referred stockholders

C. ommon stockholders

D. ebt holders

View answer

Correct Answer: D

Question #55

According to the AIMR PPS, composites must include new portfolios at the start of the next performance measurement period, ________, after the portfolio comes under management or according to reasonable and consistently applied firm guidelines.

A. t least annually

B. t least semi-annually

C. t least quarterly

D. t least monthly

View answer

Correct Answer: C

Question #56

At December 31, 1996, Eaton Corp. reported $1,750,000 of appropriated retained earnings for the construction of a new office building, which was completed in 1997 at a cost of $1,500,000. In 1997, Eaton appropriated $1,200,000 of retained earnings for the construction of a new plant. Also, $2,000,000 of cash was restricted for the retirement of bonds due in 1998. In its 1997 balance sheet, what amount should Eaton report as appropriated retained earnings?

A. 2,950,000

B. 3,200,000

C. 1,450,000

D. 1,750,000

E. 1,200,000

View answer

Correct Answer: E

Question #57

Although trade-date accounting is recommended, ________ accounting that is disclosed is acceptable for calculating performance.

A. ettlement-date

B. aintenance

C. ccrual

D. omposite

E. erformance

View answer

Correct Answer: A

Question #58

Which of the following is/are true?

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

B. , II & III

C. II only

D. I & III

E. I only

View answer

Correct Answer: H

Question #59

If you deposit $5,000 into an account paying 9% per year, compounded monthly, how much do you have in the account in 10 years?

A. 5,403

B. 12,001

C. 9,116

D. 2,039

E. 12,256

View answer

Correct Answer: E

Question #60

You have set up a test of a suitably phrased null hypothesis. After analyzing the statistical underpinnings of the test and the stringency requirements you have imposed, you have determined that the probability of rejecting the null hypothesis equals 30%. The probability that you will reject the null hypothesis when it is true is equal to 13% and the probability that you will reject the null hypothesis when it is false is equal to 17%. The significance level of your test equals ________.

A. 7%

B. %

C. 0%

D. 3%

View answer

Correct Answer: D

Question #61

Laura Mack, is considering purchasing two Treasury securities. The first is the 7-year on-the-run Treasury issued last week that has a coupon rate of 4.98%. The second is a 7-year off-the-run Treasury that was issued two months ago and has a coupon rate of 4.74%. Which of the following statements regarding the two issues under consideration is most accurate?

A. he on-the-run issue has higher reinvestment risk because of its higher coupon rate

B. he on-the-run issue has higher interest rate risk because of its higher coupon rate

C. oth the on-the-run and the off-the-run issues have equivalent interest rate risk

View answer

Correct Answer: A

Question #62

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 #63

You are given a risk-free rate of 3% per year, a portfolio return of -11% per year, and a standard deviation of portfolio return is 20% per year. What is the Sharpe measure of risk-adjusted performance?

A. 0

B. 0

C. 0

D. 0

View answer

Correct Answer: A

Question #64

What is the annual Internal Rate of Return of this series of annual cash flows: Year 0: <$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. 6

B. 7

C. 8

D. 5

E. 3

View answer

Correct Answer: C

Question #65

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

A. xpenses are recognized as services are used

B. I & III

C. & II

D. & III

E. , II & III

View answer

Correct Answer: B

Question #66

RipOff Dealers, Inc. offers a financing plan for car purchases, charging 2% per month. If a car costs $30,000, what's the monthly payment you will have to make - starting a month from now - if you need 5 years to pay off the debt on the car?

A. 824

B. 513

C. 863

D. 798

View answer

Correct Answer: C

Question #67

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

A. 4

B.

C. one of these answers

D. 2

E. 1

View answer

Correct Answer: A

Question #68

Which of the following qualifies as a disposal of a segment of a business?

A. errier Inc

B. uperpharm Drugs, operator of chain of discount drug stores, reaches an agreement to sell its Boston location to a competitor

C. rving Inc

D. one of these answers

E. readrite, a shoe manufacturer, has decided to discontinue its line of work boots

View answer

Correct Answer: A

Question #69

You have a portfolio of two assets, X and Y. X has an expected return of 15% with a variance of 900%%, and Y has an expected return of 9% with a variance of 400%%. Assume the covariance between X and Y is 225%%. For a portfolio composed of 50% X and 50% Y, find the expected return and variance.

A. 0%, 437

B. 2%, 437

C. 2%, 367

D. 4%, 512

View answer

Correct Answer: B

Question #70

ABC Corporation has just issued $200 million of 6.5% $1,000 par value bonds at face value. Which of the following requirements in the indenture for these bonds would most likely be considered a negative covenant? ABC must:

A. aintain its manufacturing equipment in good condition

B. ake timely semiannual payments of interest and principal when due

C. ave paid all bond coupon payments due before it can pay cash dividends

View answer

Correct Answer: C

Question #71

When presenting the components of total return for a real estate portfolio, the recognition of income at ________ level, rather than at the operating level, is preferred.

A. isk

B. urchase

C. ealized

D. nvestment

E. omposite

View answer

Correct Answer: D

Question #72

A ratio that measures the average portion of each dollar of revenue that results in profit is

A. rofit margin

B. oth of these answers are correct

C. either of these answers is correct

D. eturn on sales

View answer

Correct Answer: B

Question #73

You are running a year-end bonus pool for your top credit analysts. You have 10 analysts, and you wish to recognize the top 3. How many different possible outcomes are there, if all three get the same bonus? How many different outcomes are there if the top analyst gets 50% of the bonus pool, the second best analyst gets 30%, and the third best gets 20%?

A. 20; 720

B. 20; 120

C. 20; 720

D. 20; 120

View answer

Correct Answer: C

Question #74

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

A. isk tolerance

B. ime horizon

C. xpected cash flows

D. he existence of separate beneficiaries

E. one of these answers

View answer

Correct Answer: D

Question #75

What is the annual Internal Rate of Return of this series of annual cash flows: Year 0: <$14,000>, Year 1:$5,000, Year 2: $4,000, Year 3: $5,000, Year 4 a negative number).

A. 0

B. 1

C. 2

D. 5

E. 0

View answer

Correct Answer: B

Question #76

An analysis of a firm's financial statements indicates that the average age of its assets is declining. This could be due to which of the following?

A. he firm is acquiring new assets with longer depreciable lives

B. & IV

C. & II

D. , II, III & IV

E. II & IV

View answer

Correct Answer: B

Question #77

The AIMR Performance Presentation Standards are

A. oluntary standards for the industry

B. andatory for CFA Charterholders and Candidates

C. oluntary standards for the industry, but mandatory standards for AIMR members

D. andatory standards for the industry

View answer

Correct Answer: A

Question #78

Keynesian analysis implies that

A. lexible wages and prices will quickly direct a market economy to full employment

B. he federal budget should be balanced annually

C. luctuations in aggregate demand are an important source of economic instability

D. luctuations in the money supply are the major source of economic instability

View answer

Correct Answer: C

Question #79

If the cost of a hamburger is $1.99 today, what would it cost in 30 years, assuming the price increases at a rate of 8% per year, compounded annually?

A. 2

B. 17

C. 6

D. 20

E. 31

View answer

Correct Answer: D

Question #80

Stock A is highly volatile while stock B has low volatility. The difference between the arithmetic and geometric rates of return will be:

A. ame for both stocks, since the difference is not dependent on volatility

B. arger for stock A or stock B, depending on their riskiness

C. arger for stock A

D. arger for stock B

View answer

Correct Answer: C

Question #81

Standard III (B) is known as ________.

A. nteractions with Clients and Prospects

B. reservation of Confidentiality

C. one of these answers

D. air Dealing

E. nvestment Process

View answer

Correct Answer: F

Question #82

In reference to AIMR-PPS, which of the following is/are true?

A. he PPS are explicitly incorporated in the AIMR Code of Ethics and Standards of Professional Conduct

B. , II and III

C. II only

D. I and III only

E. only

View answer

Correct Answer: B

Question #83

Redeemable preferred stock

A. s reported in stockholders' equity of the balance sheet

B. s reported after liabilities but before the equity section of the balance sheet

C. ust be computed at its market value on the balance sheet

D. as higher priority for liquidation and dividends than preferred stock

E. s required to be listed only as a footnote in the balance sheet

View answer

Correct Answer: B

Question #84

Which of the following AIMR Standards states that the financial analyst shall distinguish between facts and opinions in research reports?

A. II A

B. II D

C. II (B

D. V (A

View answer

Correct Answer: D

Question #85

What is the range of values for the coefficient of determination?

A. one of these answers

B. to +1 inclusive

C. 1 to +1 inclusive

D. 3 to +3 inclusive

E. AI -1 to 0 inclusive

View answer

Correct Answer: B

Question #86

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

A. he government allows tax revenues to rise and fall with the business cycle, while keeping spending constant

B. he Central Bank acts to smooth the business cycle

C. he Central Bank attempts to keep inflation at a minimum, ignoring unemployment

D. he Central Bank prints new currency each year in order to increase the money supply by 3%

E. he Central Bank targets short-term interest rates

View answer

Correct Answer: D

Question #87

Which of the following factors would affect the authenticity of a firm's receivables?

A. ndustry practices

B. ll of these answers

C. firm's policy for returns and allowances

D. one of these answers

E. firm's credit policy

View answer

Correct Answer: B

Question #88

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

A. ost recent price

B. he average price

C. arliest price

D. one of these answers is correct

View answer

Correct Answer: A

Question #89

John Gavin, CFA, manages money for high net worth individuals. Gavin utilizes a combination of open-end and closed-end mutual funds to meet each individual's investment objectives. Gavin is evaluating a mutual fund that has assets of $233 million and liabilities of $2 million. In addition, the Fund has a sales charge of 4% and a redemption fee of 1%. The Fund has 16.8 million shares. Gavin makes the following two statements.Statement 1: The net asset value (NAV) of the fund is $13.75.Statement 2: The primar

A. nly Statement 1 is correct

B. nly Statement 2 is correct

C. tatements 1 and 2 are both correct

View answer

Correct Answer: A

Question #90

What simple annual interest rate would cause a $110 deposit to grow to $120 in 2 years?

A.

B.

C.

D. 4

E.

View answer

Correct Answer: A

Question #91

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

A. odel

B. ortfolio

C. ash

D. erformance

E. sset-only

View answer

Correct Answer: E

Question #92

According to Standard IV (B.7), Disclosure of Conflicts, service on a board of directors poses which of the following as a basic conflict of interest?

A. iduciary duties owed to clients and the duties owed to shareholders

B. one of these answers

C. ll of these answers

D. nvestment personnel who serve as directors may receive securities or the option to purchase securities of the company as compensation for serving on the board

E. pportunity to receive material nonpublic information

View answer

Correct Answer: C

Question #93

Young, a portfolio manager with Northside Bank, has just been given investment authority for a newly acquired pension account. Client objectives have not yet been established. On the day the account is received, $2 million in bonds, representing 4 percent of the portfolio, mature. Which of the following is Young's best course of action on that day?

A. nvest the proceeds in cash equivalents until a meeting can be arranged to establish fund objectives

B. ontact the client's former investment advisor and take investment action based on previously used guidelines

C. nvest the proceeds in accordance with the bank's current asset allocation strategy

D. ake no decision until client objectives have been established

View answer

Correct Answer: A

Question #94

Suppose we select every fifth invoice in a file. What type of sampling is this?

A. andom

B. one of these answers

C. luster

D. ystematic

E. tratified

View answer

Correct Answer: D

Question #95

Standard ________ states that the financial analyst must use particular care to maintain independence and objectivity in relationships with issuers of securities.

A. (B

B. II (1)

C. V (A

D. I (C

E. one of these answers

View answer

Correct Answer: C

Question #96

Jerry Paris, CFA, manages a high yield bond fund. 20% of Paris' portfolio is invested in distressed securities. A colleague commented that investing in distressed securities is analogous to venture capital investing. Which of the following statements concerning distressed securities and venture capital is least likely to be true? An investment in distressed securities is similar to an investment in venture capital because both:

A. re illiquid,

B. re normally priced efficiently

C. equire a long time horizon

View answer

Correct Answer: B

Question #97

Mike Bowers has observed that during 2004 the S&P 500 index officially reported a return of 20%. After recalculating the returns on an equally weighted basis, Bowers estimates that the index returned 15%. The difference in the two calculations of return is best explained by:

A. arge capitalization stocks outperforming small capitalization stocks

B. mall capitalization stocks outperforming large capitalization stocks

C. he interest expenses on margin accounts

View answer

Correct Answer: A

Question #98

Tomonaga Olawando is a research analyst currently doing research on Cleebok Shoes, a footwear manufacturer infamous for its exorbitantly priced shoes. Tomonoga has been interviewing Pollyanna Givens, a senior vice president with the public relations division. Pollyanna has told him that the investment community has underestimated the payoffs from Cleebok's plan to outsource shoe production to Mexico, thus cutting productions costs significantly. She told him her estimate puts thecost savings close to $600 m

A. ot violated any code of ethics

B. II only

C. I and III only

D. I, III and IV only

E. only

View answer

Correct Answer: B

Question #99

Standard III (A) - Obligation to Inform Employer of Code & Standards - requires all AIMR members, Charterholders and CFA candidates inform their employers about their personal obligation to abide by the code. Which of the following is/are true in regard to this requirement?

A. he notification can be in either oral form or in writing, either in print, handwriting or by electronic means like email

B. II only

C. , II and III

D. and III only

E. and II only

View answer

Correct Answer: A

Question #100

Which of the following can be found in Standard II?

A. embers shall not participate in plagiarism

B. embers shall maintain appropriate records to support the reasonableness of recommendations

C. embers shall maintain knowledge of and comply with all applicable laws

D. embers shall not undertake any independent practice in competition with employer without written consent

E. embers shall make reasonable efforts to achieve public dissemination of material nonpublic information disclosed in breach of a duty

View answer

Correct Answer: A

Question #101

An investor wants to take advantage of the 5-year spot rate, currently at a level of 4.0%. Unfortunately, the investor just invested all of his funds in a 2-year bond with a yield of 3.2%. The investor contacts his broker, who tells him that in two years he can purchase a 3-year bond and end up with the same return currently offered on the 5-year bond. What 3-year forward rate beginning two years from now will allow the investor to earn a return equivalent to the 5-year spot rate?

A.

B.

C.

View answer

Correct Answer: B

Question #102

Martha Maris is a qualified investment advisor who has been handling investment accounts of a few wealthy friends for a fee. She recently interviewed with Capital Management, Inc. and accepted a position as a money manager with them. She:

A. eeds to inform only Capital Management about her old clients

B. ust inform Capital Management as well as all her old clients in writing about the arrangement

C. oes not have to inform her client friends about her employment with Capital Management

D. oes not have to inform Capital Management about her old clients since they were not retained through Capital Management

View answer

Correct Answer: B

Question #103

Which of the following assumptions is least likely to be consistent with the concept of efficient capital markets?

A. xpected returns implicitly include risk in the price of the security

B. arket participants correctly adjust prices based on new information

C. ew information about securities comes to the market in a random fashion

View answer

Correct Answer: B

Question #104

According to the AIMR-PPS, account portfolios must be grouped into composites

A. ased on similar investment strategy or objective

B. ll of these answers are correct

C. ased on the date the portfolios were initiated

D. ased on the individual account manager's clientele

View answer

Correct Answer: A

Question #105

If a broad increase in the price of stocks causes an increase in the real wealth of individuals, then the

A. ggregate demand curve will shift to the left

B. ggregate demand curve will shift to the right

C. eneral price level will fall

D. ggregate quantity demanded must rise

View answer

Correct Answer: B

Question #106

What is the standard error of estimate?

A. ased on squared vertical deviations between Y and Y'

B. one of these answers

C. easure of the accuracy of the prediction

D. annot be negative

E. ll of these answers

View answer

Correct Answer: E

Question #107

An economy is currently in equilibrium at full employment. If there is an anticipated decrease in demand, whichof the following effects can be seen in the short run?

A. eal GDP decreases

B. V only

C. , II, III & IV

D. II & IV

E. I, III & IV

View answer

Correct Answer: D

Question #108

If decision makers fail to anticipate the inflationary effects of demand stimulus policies, in the short run the stimulus will

A. ncrease both inflation and the nominal interest rate but exert little impact on real output and employment

B. ncrease the real interest rate

C. educe the real interest rate

D. ead primarily to larger output and high employment

E. oth lead primarily to larger output and high employment and reduce the real interest rate

View answer

Correct Answer: E

Question #109

According to the AIMR-PPS, performance must be calculated

A. efore or after the deduction of trading expenses, as long as that information is disclosed

B. efore or after the deduction of trading expenses, without the need for disclosures because there will be no difference in the numbers

C. efore the deduction of trading expenses

D. fter the deduction of trading expenses

View answer

Correct Answer: D

Question #110

Which measure of central tendency is found by arranging the data from low to high and selecting the middle value?

A. eometric mean

B. edian

C. one of these answers

D. ean

E. ode

View answer

Correct Answer: B

Question #111

A large group of inductees was given a mechanical aptitude and a finger dexterity test. The mean score on the mechanical aptitude test was 200, with a standard deviation of 10. The mean and standard deviation for the finger dexterity test were 30 and 6 respectively. What is the relative dispersion in the two groups?

A. echanical 5 percent, finger 20 percent

B. echanical 500 percent, finger 200 percent

C. echanical 20 percent, finger 10 percent

D. echanical 50 percent, finger 200 percent

E. one of these answers

View answer

Correct Answer: A

Question #112

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 #113

A firm's tax rate is 40%. If its pretax income is overstated by 100 due to errors in recording cash transactions, then the operating cash flow due to these errors is:

A. verstated by 40

B. verstated by 100

C. verstated by 60

D. nderstated by 60

View answer

Correct Answer: C

Question #114

Investments in debt securities classified as held-to-maturity securities should be valued at

A. air value

B. ower of cost or market

C. resent value

D. mortized cost

E. cquisition cost

View answer

Correct Answer: D

Question #115

On a survey questionnaire, students were asked to indicate their class rank in college. If there were only four choices from which to choose, which measure(s) of central tendency would be appropriate to use for the data generated by that questionnaire item?

A. ean and mode

B. ode only

C. ode and median

D. edian only

E. ean and median

View answer

Correct Answer: C

Question #116

A hypothesis test is conducted at the .05 level of significance to test whether or not the population correlation is zero. If the sample consists of 25 observations and the correlation coefficient is 0.60, then what is the computed value of the test statistic?

A.

B.

C.

D.

E. one of these answers

View answer

Correct Answer: B

Question #117

A firm has purchased heavy machinery with a useful life of 7 years. It cost $28,000 and its salvage value is estimated at $4,000. If the firm uses double declining method, what's the depreciation expense recognized in Year 1?

A. 3,429

B. 8,000

C. 6,857

D. 4,000

View answer

Correct Answer: B

Question #118

An investment management firm has been hired by ETV Corporation to work on an initial public offering for the company. The firm's brokerage unit now has a sell recommendation on ETV, but the head of the investment banking department has asked the head of the brokerage unit to change the recommendation from sell to buy. According to the Standards, the head of the brokerage unit would be permitted to:

A. ncrease the recommendation by no more than one increment (in this case, to a hold recommendation)

B. ssign a new analyst to decide if the stock deserves a higher rating

C. lace the company on a restricted list and give only factual information about the firm

D. eassign responsibility for rating the stock to the head of the investment banking unit

View answer

Correct Answer: C

Question #119

What are the two rejection areas in using a two-tailed test and the 0.01 level of significance?

A. one of these answers

B. bove 1

C. bove 1

D. bove 1

E. bove 2

View answer

Correct Answer: E

Question #120

A financial analyst should conduct himself with ________, competence and dignity and act in an ethical manner in his dealings with the public, clients, customers, employers, employees and fellow analysts.

A. ntegrity

B. orality

C. one of these answers

D. onor

E. rincipal

View answer

Correct Answer: A

Question #121

Standard IV (B.5) is known as ________.

A. one of these answers

B. reservation of Confidentiality

C. air Dealing

D. nvestment Process

E. uty to Employer

View answer

Correct Answer: B

Question #122

Which of the following is a current liability?

A. onds

B. epreciation

C. referred stock

D. ccounts payable

E. one of these answers

View answer

Correct Answer: D

Question #123

A researcher has organized 310 observations into 9 classes. The frequency of the 50-75 frequency class is 34.The relative frequency of the class equals ________.

A.

B. 4

C.

D.

View answer

Correct Answer: C

Question #124

In practice, companies who use the direct method in presenting cash flows from operations:

A. ust also disclose cash flows from operations using the indirect method

B. ust classify interest paid as an investing activity

C. ust be privately held or closely held corporations

D. re not required to report cash flows not incurred during the ordinary course of business

View answer

Correct Answer: A

Question #125

A firm is purchased for more than the fair market value of its assets. The excess is:

A. ritten off against the retained earnings on the balance sheet

B. reated as an extraordinary loss & presented net of taxes on the income statement

C. onsidered as "Goodwill

D. onsidered a "premium paid" and amortized over the life of the acquired assets

View answer

Correct Answer: C

Question #126

________ permits the producers of each nation to concentrate on the things they do best while trading for those things they do least well.

A. one of these answers

B. tariff

C. quota

D. rade

View answer

Correct Answer: D

Question #127

If the null hypothesis that two means are equal is in fact true, where will 97% of the computed z-value lie between?

A. /- 2

B. /- 2

C. /- 2

D. one of these answers

E. /- 2

View answer

Correct Answer: C

Question #128

American textile manufacturers and union members have often lobbied successfully for restrictive quotas limiting the importation of textile products. The major impact of these quotas is

A. ower prices for American consumers and an improvement in the quality of textile products available

B. permanent reduction in unemployment in the U

C. igher prices for American consumers, a narrower selection of products and less competition in the U

D. ong-run profits in the U

View answer

Correct Answer: C

Question #129

A perpetuity of $5,000 a year is priced at $40,000. The annual discount rate is:

A. 2

B. 3

C. 1

D. 2

View answer

Correct Answer: A

Question #130

A firm using LIFO accounting has a LIFO reserve of 600, with a LIFO ending inventory of 4,900. It is currently in the 40% tax bracket. If it switches to FIFO accounting, it's equity ________.

A. ecreases by 240

B. ecreases by 360

C. ncreases by 360

D. ncreases by 240

View answer

Correct Answer: C

Question #131

Which of the following statements is true?

A. llocation of plant asset costs, through depreciation, if consistently applied, does not lend itself to serious distortion

B. one of these answers

C. ll of these answers

D. etermination of the useful life of an asset, if consistently applied, does not lend itself to serious distortion

E. istorical cost valuation of plant assets, if consistently applied, does not lend itself to serious distortion

View answer

Correct Answer: E

Question #132

The seasonal output of a new experimental strain of pepper plants was carefully weighed. The mean weight per plant is 15.0 pounds, and the standard deviation of the normally distributed weights is 1.75 pounds. Of the 200 plants in the experiment, how many produced peppers weighing between 13 and 16 pounds?

A. 00

B. one of these answers

C. 18

D. 3

E. 97

View answer

Correct Answer: C

Question #133

Events A and B are mutually exclusive. P(A) = 0.45, P(B) = 0.27. The probability of neither A nor B occurring equals ________.

A.

B.

C.

D.

View answer

Correct Answer: A

Question #134

Which of the following is/are true about potentially dilutive securities?

A. ptions and warrants are assumed to be exercised at the beginning of the period or at the time of issuance, whichever is later

B. & II

C. only

D. , II & III

E. I & III

View answer

Correct Answer: B

Question #135

The prevailing budget philosophy prior to Keynes called for a balanced budget. Keynes argued that the government's tax and spending policies should be determined by the

A. emand requirements necessary to attain full employment of resources

B. ublic's willingness to accept or reject tax changes

C. ize and quality of the labor force

D. emand for public goods

View answer

Correct Answer: D

Question #136

Inflation contributes to the depreciation of a nation's currency only when a country's rate of inflation is ________ that of its trading partners.

A. ess rapid than

B. qual to

C. ore rapid than

D. one of these answers, inflation rate is irrelevant

View answer

Correct Answer: C

Question #137

What percent of the observations will lie above the mean plus two standard deviations?

A. %

B. 8%

C.

D. one of these answers

E. 5%

View answer

Correct Answer: C

Question #138

Profit margin is a ratio that:

A. hows the return on net sales

B. s calculated as net sales divided by operating expenses

C. ields the company's financial position at a point in time

D. ompares total assets to net sales

View answer

Correct Answer: A

Question #139

Where does the coefficient of variation (CV) generally lie between?

A. 1 and +1

B. 3 and +3

C. one of these answers

D. % and infinity

E. nlimited values

View answer

Correct Answer: D

Question #140

How many months will it take for an original $1,000 deposit to grow to be $2,000, if the deposit earns interest at 7% per year, compounded monthly?

A.

B. 0

C. 17

D. 25

E. 19

View answer

Correct Answer: E

Question #141

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

A. roxy voting

B. one of these answers

C. eturn objectives

D. ime horizon

E. iquidity needs

View answer

Correct Answer: C

Question #142

When preparing a direct method statement of cash flows, the principal component of cash flow from operating activities is

A. he decrease in accounts receivable

B. ash collections

C. ash received from short- and long-term borrowings

D. he increase in accounts payable

E. et income plus depreciation expense

View answer

Correct Answer: B

Question #143

What monthly deposit would you need to make, beginning one month from today, into an account paying 11% per year, compounded monthly, in order to have $500,000 in 30 years?

A. 14,555

B. 178

C. 218

D. 129

E. 314

View answer

Correct Answer: B

Question #144

An increase in the LIFO reserves implies which of the following?

A. rices may have risen

B. I, III & IV

C. & II

D. & IV

E. one of them

View answer

Correct Answer: C

Question #145

If you deposit $2,345 into an account paying 6.5% per year simple interest, how much interest will be earned after 8 months?

A. 101

B. 14

C. 309

D. 94

E. 122

View answer

Correct Answer: A

Question #146

The National Center for Health Statistics reported that of every 883 deaths in recent years, 24 resulted from an automobile accident, 182 from cancer and 333 from heart disease. Using the relative frequency approach, what is the probability that a particular death is due to an automobile accident?

A. 82/883 or 0

B. one of these answers

C. 4/883 or 0

D. 4/333 or 0

E. 39/883 or 0

View answer

Correct Answer: C

Question #147

Standard II includes rules on which of the following?

A. rofessional Misconduct

B. rohibition against Plagiarism

C. ll of these answers

D. se of Professional Designation

View answer

Correct Answer: C

Question #148

Suppose that events A, B, C, and D are independent, and have probabilities of 0.25, 0.50, 0.40, and 0.30, respectively. What is P(ABCD)?

A.

B. 5

C.

D.

View answer

Correct Answer: C

Question #149

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

A. 00,000

B. 75,000

C. 00,000

D. 00,000

View answer

Correct Answer: D

Question #150

The sponsors of a well-known charity came up with a unique idea to attract wealthy patrons to the $500 a plate dinner. After the dinner, it was announced that each patron attending could buy a set of 20 tickets for the gaming tables. The chance of winning a prize for each of the 20 plays is 50-50. If you bought a set of 20 tickets, what is the chance that you will win 15 or more prizes?

A.

B.

C.

D. one of these answers

E.

View answer

Correct Answer: A

Question #151

You are examining a group of 20 mutual funds. You find that 10 have a 5% cash position, 4 have a 10% cash position, and 6 have a 2% cash position. What is the weighted average cash position of these 20 mutual funds?

A.

B.

C.

D.

View answer

Correct Answer: B

Question #152

Which of the following is/are required by AIMR-PPS with regards to creation and maintenance of composites?

A. erformance must be measured at least quarterly

B. and III only

C. , II and III

D. only

E. and II only

View answer

Correct Answer: D

Question #153

If the Fed wanted a more expansionary monetary policy, which of the following would be most appropriate?

A. educe taxes

B. ncrease government expenditures

C. uy government bonds from the public

D. aise the discount rate

View answer

Correct Answer: C

Question #154

Which of the following is not an example of a cash flow from operations?

A. one of these answers is correct

B. ash received from customers

C. ash paid for merchandise

D. ash paid for taxes

View answer

Correct Answer: A

Question #155

One of the discretionary accounts managed by Farnsworth is the Jones Corporation employee profit- sharing plan. Jones, the company president, recently asked Farnsworth to vote the shares in the profit- sharing plan in favor of the company-nominated slate of directors and against the directors sponsored by a dissident stockholder group. Farnsworth does not want to lose this account because he directs all the account's trades toa brokerage firm that provides Farnsworth with useful information about tax-free i

A. id not violate the Standards in voting the share in the manner requested by Jones or in directing the trades to the brokerage firm

B. iolated the Standards in directing the trades to the brokerage firm but not in voting the shares as requested by Jones

C. iolated the Standard in voting the shares in the manner requested by Jones and in directing trades to the brokerage firm

D. iolated the Standards in voting the shares in the manner requested by Jones but not in directing trades to the brokerage firm

View answer

Correct Answer: A

Question #156

Firm A issues convertible bonds to raise capital in the amount of a million dollars. An identical Firm B issues debt with warrants attached to raise the same amount. Which of the following statements is/are true in this situation?

A. irm A ignores the convertibility feature completely while recording the bonds

B. , II & III

C. I & III

D. only

E. I only

View answer

Correct Answer: A

Question #157

Which of the following is/are true?

A. ultiplying a variable by a positive constant will cause its standard deviation to be multiplied by the square of that constant

B. V only

C. , II and IV

D. I only

E. only

View answer

Correct Answer: C

Question #158

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

A. nderstated Understated UnderstatedII

B.

C. I

D. V

E. II

View answer

Correct Answer: A

Question #159

"Deferral" refers to:

A. postponement of recognition of income until the earnings process is actually completed

B. one of these answers

C. ecognition of an asset for all payments made for goods and services not yet delivered

D. ostponement of tax payments through the use of tax credits

View answer

Correct Answer: A

Question #160

Bill Turner, CFA, is short a futures contract on wheat. Turner entered into the futures position three months ago at a contract price of $50. The contract expiration is tomorrow. The settlement prices for the past four days (from oldest to most recent) were $56, $53, $49, and $52. If the settlement price on the expiration day is $57, which of the following best describes a method Turner is most likely to use to terminate his futures contract?

A. ell a futures contract for $57 and receive a mark-to-market profit of $5

B. uy a futures contract for $57 and incur a mark-to-market loss of $5

C. eave the contract open, deliver the wheat to the long, and receive a price of $57

View answer

Correct Answer: B

Question #161

To claim compliance, firms must meet

A. ll composite, calculation, presentation and disclosure requirements of the AIMR Performance Presentation Standards

B. ll composite, calculation, presentation and disclosure recommendations of the AIMR Performance Presentation Standards

C. ll composite, calculation, presentation and disclosure requirements and recommendations of the AIMR Performance Presentation Standards

D. ll composite, calculation, presentation and disclosure requirements and at least half of the recommendations of the AIMR Performance Presentation Standards

View answer

Correct Answer: A

Question #162

The weighted average method is based on the assumption that the cost of merchandise sold should be calculated using the:

A. verage price of beginning inventory plus purchases during the period

B. verage price per unit of ending inventory

C. verage price per unit of beginning inventory

D. verage price of ending inventory plus purchases during the period

View answer

Correct Answer: A

Question #163

Standard IV (B.5), Preservation of Confidentiality states:

A. ll of these answers

B. one of these answers

C. embers must release information to AIMR when the Professional Conduct Program is holding an investigation, unless there is a settlement agreement between the parties that stipulates confidentiality

D. f the information is confidential, even illegal activity may not be reported, because there is the issue of trust between parties

E. embers should avoid disclosing any information received from a client except to authorized fellow employees who are also working for the client

View answer

Correct Answer: E

Question #164

The Central Bank increases the money supply by 5%. This was not anticipated by economic participants. The economy is operating below potential. In the long-run, this will cause the aggregate supply curve to _______, the aggregate demand curve to ________, and the price level to ________.

A. hift left, shift right, increase

B. ot change, shift right, increase

C. ot change, shift left, increase

D. ot shift, not shift, not change

E. hift right, shift left, increase

View answer

Correct Answer: A

Question #165

Which of the following is NOT a measure of dispersion?

A. AD

B. ariance

C. ode

D. ange

View answer

Correct Answer: C

Question #166

The weights (in grams) of the contents of several small bottles are 4, 2, 5, 4, 5, 2 and 6. What is the sample variance?

A.

B. one of these answers

C.

D.

E.

View answer

Correct Answer: D

Question #167

3 months ago, Fred Hoyle received the AIMR letter, informing him that he had passed Level II exam. He has now registered for Level III exam. Fred can do which of the following?

A. ut "CFA-II" on his business card, as long as it is in a smaller font than his name

B. , II and III only

C. I and IV only

D. , II and IV only

E. I and III only

View answer

Correct Answer: D

Question #168

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 #169

The following data have been extracted from the financial statements of a firm for two years, 1991 and 1992:1991 1992Assets 9,947 9,682Sales 11,035 10,377Current liabilities 4,193 3,920Non-current liabilities 3,827 3,476The asset turnover and the equity turnover for 1992 equal ________.

A.

B.

C.

D.

View answer

Correct Answer: B

Question #170

According to monetarists, ________ is a primary source of economic instability:

A. luctuations in aggregate demand for money

B. rratic monetary policy

C. luctuations in aggregate demand for money and fluctuations in aggregate consumption demands

D. luctuations in aggregate consumption demands

View answer

Correct Answer: B

Question #171

Which of the following AIMR Standards states that the financial analyst must exercise diligence and thoroughness in making investment recommendations or taking investment actions?

A. II B

B. V A

C.

D. one of these answers

View answer

Correct Answer: B

Question #172

Frictional unemployment means

A. here is a decline in the demand for labor in the aggregate, due to recessionary tendencies in the economy

B. here are not enough jobs to go around

C. obs are plentiful but workers scarce

D. mperfect information prevents qualified workers from matching up with the available jobs

View answer

Correct Answer: D

Question #173

You are examining a portfolio composed of 1/3 money-market investments, 1/3 bonds, and 1/3 stocks. Last year, the return on the money-market investments was 5%; the return on bonds was 15%, and the return on stocks was -2%. What is the portfolio's weighted-average return?

A.

B.

C.

D.

View answer

Correct Answer: D

Question #174

Delroy McWilliams, a quantitative analyst with Churn Brothers Brokerage, is examining a data sample and has amassed the following information:Standard deviation of the sample: 70Number of observations: 600Sample mean: 812Assume that Mr. McWilliams formulates a null hypothesis that states that the value of the population mean is equal to 800. Additionally, assume that the population standard deviation is unknown. Given this information, what is the standard error of the estimate? Further, what is the test st

A.

B.

C. one of these answers is completely correct

D.

E.

View answer

Correct Answer: C

Question #175

Restricted cash balances are ________.

A. on-current assets

B. ot considered assets

C. one of these answers

D. egarded as part of long-term equity

View answer

Correct Answer: A

Question #176

Anne Quincy took the short side of a forward contract on the S&P 500 Index three months ago in an attempt to hedge short-term changes in her index portfolio. The contract had a term of six months at the purchase date, a contract price of $ 1,221 and Mason Inc. as the counterparty. Quincy is now considering unwinding her short position using either a three-month Mason Inc. contract with a price of $1,220, a three-month JonesCo contract with a price of S1,219, or a three-month Redding Company contract with a

A. onesCo

B. ason Inc

C. edding Company

View answer

Correct Answer: B

Question #177

Which of the following is an integral part of the Keynesian view of the business cycle?

A. quilibrium is a state of full employment without inflation

B. ultiplier effects magnify the impact of changes in aggregate demand (especially in investment) and thereby promote economic instability

C. hanges in private consumption are the major source of economic instability

D. upply creates its own demand

E. alling wage rates eventually lead the economy back to full employment

View answer

Correct Answer: B

Question #178

Jack Cheney purchases an IBM October 80 put contract for a premium of $5. Cheney holds the option until the expiration date when IBM stock sells for $78 per share. At expiration, what is the loss on the contract?

A. $2

B. S3

C. $5

View answer

Correct Answer: B

Question #179

What impact will the amortization of an intangible asset over a longer than appropriate period have on a firm?

A. t will result in higher than otherwise sales revenues

B. one of these answers

C. ll of these answers

D. t will reduce a firm's current income tax liability

E. t will improve reported earnings

View answer

Correct Answer: E

Question #180

Standard V (B) deals with

A. ndependence and objectivity

B. erformance presentation

C. reservation of confidentiality

D. nsider information

E. air dealing

View answer

Correct Answer: B

Question #181

A portfolio manager has estimated the beta of a stock at 0.8, with a z-statistic of 1.7 in a sample size of 300 observations. At 5% significance level in a two-sided test the critical value is 1.96, therefore, the manager should conclude that:

A. he null hypothesis of beta = 0 cannot be rejected

B. he null hypothesis of beta = 0 cannot be accepted

C. he alternative hypothesis that beta is nonzero should be rejected

D. he alternative hypothesis that beta is not zero should be accepted

View answer

Correct Answer: A

Question #182

Which would not be categorized as an unusual or infrequent item?

A. rovisions for environmental remediation

B. ains or losses from disposal of a portion of a business segment

C. estructuring costs

D. ains or losses on qualifying early retirement of debt

E. mployee separation costs

View answer

Correct Answer: D

Question #183

Which of the following best describes an option that gives the owner the right to sell 100 shares of stock only on the expiration date three months from now at a strike price of $35, when the current stock price is $25? This option is an:

A. ut-of-the-money American put option

B. n-the-money European put option

C. ut-of-the-raoney European put option

View answer

Correct Answer: B

Question #184

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 #185

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

A.

B.

C.

D. one of these answers

E.

View answer

Correct Answer: E

Question #186

Regarding Standard III (A), which of the following is true?

A. f the employer has publicly acknowledged, in writing, adoption of AIMR's Code and Standards as part of its firm policies, then the member need not give formal written notification

B. member does not have to notify the supervisor, if the supervisor is a CFA charterholder

C. otification must be given to the chief operating officer (or equivalent), orally or in writing

D. otification must always be given, orally or in writing

E. one of these answers is true

View answer

Correct Answer: A

Question #187

Trisdale is a portfolio manager who has consistently outperformed the market on a risk-adjusted basis for the past 3 years. As an appreciation for his work, one of his clients recently gave him a travel package to Vancouver worth around $5,000. Trisdale informed his supervisor about this gift and then took time off from work to enjoy a vacation in Vancouver. Trisdale has

A. iolated Standard III (D) - Disclosure of Additional Compensation Arrangements

B. iolated Standard IV (A

C. ot violated the AIMR code of ethics

D. iolated Standard IV (B

View answer

Correct Answer: C

Question #188

What deposit today is needed to have $2,000 in 4 years, assuming the money will earn interest at 5% per year, compounded monthly?

A. 2,000

B. 1,290

C. 584

D. 1,638

E. 1,934

View answer

Correct Answer: D

Question #189

Which of the following is/are true?

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

B. , II & IV

C. I & III

D. & IV

E. I, III & IV

View answer

Correct Answer: D

Question #190

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

A. IMR regulations

B. IMR code of ethics

C. one of these answers

D. RISA

View answer

Correct Answer: D

Question #191

A firm's financial audit ensures all of the following EXCEPT:

A. he company is managing its risks within the guidelines specified in its charter

B. here are adequate controls and checks in place in its accounting systems

C. here are no material errors or omissions in its financial reports

D. he management is not misstating its performance

View answer

Correct Answer: A

Question #192

You are examining the return on equity ratios of the nation's commercial airlines. You have calculated the mean ROE to be 8%, and the sum of the squared ROEs is 0.27. Assuming there are 30 commercial airlines, what is the population variance of ROEs in this industry?

A. %%

B. 2%%

C. 0%%

D. 6%%

View answer

Correct Answer: D

Question #193

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

A. et as many people involved within the firm that a recommendation is going to be disseminated

B. horten the time frame between decision and dissemination

C. isclose levels of service

D. stablish control over trading activity

E. imultaneous dissemination

View answer

Correct Answer: A

Question #194

A firm's financial statements reveal the following data:interest coverage ratio 3.6Xinterest expense rate 7.2%depreciation 678total assets 10,946total asset turnover 1.46The firm's operating margin equals ________.

A. 3

B. 3

C. 1

D. 5

View answer

Correct Answer: C

Question #195

If your discount rate is 8% per year, calculate the present value of the following cash flows:End of year 1: $2,200End of year 2: $3,000End of year 3: $7,300

A. 11,239

B. 14,155

C. 9,876

D. 10,404

View answer

Correct Answer: D

Question #196

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

A. ross profit method

B. IFO

C. eighted average

D. IFO

View answer

Correct Answer: B

Question #197

The ______of services from foreigners ________ the supply of dollars to the exchange market.

A. mport; reduces

B. xport; expands

C. one of these answers

D. mport; expands

View answer

Correct Answer: D

Question #198

On June 30, 1996, Union Inc. purchased goodwill for $125,000 when it acquired the net assets of Apex Corp. During 1996, Union incurred additional costs of developing goodwill by training Apex employees ($50,000) and hiring additional Apex employees ($25,000). Before amortization of goodwill, Union's December 31, 1996 balance sheet should report goodwill of ________.

A. 150,000

B. 200,000

C. 75,000

D. 175,000

E. 125,000

View answer

Correct Answer: E

Question #199

Level ________ verification applies to the firm.

A. V

B.

C.

D. I

E. II

View answer

Correct Answer: C

Question #200

Standard V (A) is known as ________.

A. rohibition against Use of Material Nonpublic Information

B. uty to Employer

C. reservation of Confidentiality

D. nteractions with Clients and Prospects

E. one of these answers

View answer

Correct Answer: A

Question #201

Which of the following is not a required disclosure for real estate investments under the Performance Presentation Standards?

A. mount of leverage used

B. eturn formulas

C. ll of these answers

D. ccounting policies for capital expenditures

View answer

Correct Answer: A

Question #202

Andrea, a portfolio manager for XYZ Investment Management Company, a registered investment organization that advises investment companies and private accounts, was promoted to that position three years ago. Bates, her supervisor, is responsible for reviewing Andrea's portfolio account transactions and her required monthly reports of personal stock transactions. Andrea has been using Jonelli, a broker, almost exclusively for portfolio account brokerage transactions. For securities in which Jonelli's firm mak

A. ndrea violated the Code and Standards in that she failed to disclose to her employer her personal transactions

B. I only

C. I and III only

D. II only

E. only

View answer

Correct Answer: G

Question #203

Which of the following is/are FALSE?

A. epreciation does not affect cash flows since it is a non-cash expense

B. II only

C. & II

D. I & III

E. , II & III

View answer

Correct Answer: B

Question #204

Which of the following is an operating cash flow?

A. ividends paid out to shareholders

B. ividends received on investments in stocks

C. ll of these answers

D. ash used to replace the machine tool used in operational activities

View answer

Correct Answer: B

Question #205

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

A. isk tolerance

B. one of these answers

C. ype and nature of clients

D. xpected cash flows

E. nvestable funds

View answer

Correct Answer: C

Question #206

Performance (relating to Performance Presentation Standards) is the record of the ________.

A. erson

B. nvestment manager

C. ndividual

D. hild

E. irm

View answer

Correct Answer: E

Question #207

According to Standard IV (B.4), Priority of Transactions, ________ is recommended when a manager has purchased a security in violation of trading policy.

A. orfeit of wages for one month

B. fine imposed by the SEC

C. civil damage

D. ublic censure

E. isgorgement

View answer

Correct Answer: E

Question #208

Mark Waiters' risk aversion is relatively high compared to other individual investors. Waiters is interested in generating some income on his equity portfolio. Walters decides to establish a covered call position on CGF stock and simultaneously establish a protective put position on HSD stock. After establishing the covered calland protective put positions, which of the following would least likely describe Walters' portfolio, relative to the positions before adding the options?

A. he HSD position will have a higher break even price and less downside risk

B. he CGF position will have a lower break even price and more upside potential

C. he HSD position will have lower upside potential and less downside risk

View answer

Correct Answer: B

Question #209

A(n) ________ is a publicly available independent representation of the market and if used as a benchmark, should be investable.

A. utual fund

B. onvertible bond

C. ortfolio

D. omposite

E. ndex

View answer

Correct Answer: E

Question #210

A portfolio consists of a six-year annuity paying $250 a year and a perpetuity that pays $300 a year. The payments start at the end of the year. With a discount rate of 9% per year, the portfolio is worth:

A. 5,210

B. 3,333

C. 4,454

D. 4,768

View answer

Correct Answer: C

Question #211

Metals Inc. had the following liabilities at December 31, 1996:Accounts payable $55,000Unsecured notes, 8%, due 7/1/97 $400,000Accrued expenses $35,000Contingent liability $450,000Deferred income tax liability $25,000Senior bonds, 7%, due 3/31/97 $1,000,000The contingent liability is an accrual for possible losses on a $1,000,000 lawsuit filed against Metals Inc. Metals' legal counsel expects the suit to be settled in 1998 and has estimated that Metals will be liable for damages in the range of $450,000 to

A. one of these answers

B. 1,490,000

C. 940,000

D. 515,000

E. 1,515,000

View answer

Correct Answer: B

Question #212

Which one of the following would be classified as employed?

A. n auto worker vacationing in Florida during a layoff at a General Motors plant due to an annual change- over in models

B. parent who works 50-60 hours per week caring for family members

C. 21-year-old full-time college student

D. 17-year-old high school student who works six hours per week as a route person for the local newspaper

View answer

Correct Answer: D

Question #213

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

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

B. mall incremental principal repayments; predictable current income

C. one of these answers

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

View answer

Correct Answer: C

Question #214

A Treasury bond dealer observes the following Treasury spot rates from the spot rate curve: 1-year 7.40%, 2- year 7.00%, and 3-year 6.3%. The bond dealer also observes that the market price of a 3-year 8% coupon, 100 par value bond is $103.95. Based on this information, the dealer should:

A. uy the 8% coupon bond in the open market, strip it, and sell the pieces

B. ell the 8% coupon bond short, and buy the component cash flow strips with the proceeds

C. o nothing since the 8% bond is selling for its arbitrage-free price

View answer

Correct Answer: A

Question #215

The portion of the insurance premiums that has expired during the fiscal period is classified as

A. n increase in retained earnings

B. n asset

C. n expense

D. liability

View answer

Correct Answer: C

Question #216

In its 1996 income statement, Coopers Co. reported income before income taxes of $300,000. Coopers estimated that, because of permanent differences, taxable income for 1996 would be $280,000. During 1996, Coopers made estimated tax payments of $50,000, which were charged to income tax expense. Coopers is subject to a 30% tax rate. What amount should Coopers report as income tax expense?

A. 84,000

B. 40,000

C. 34,000

D. 90,000

E. 50,000

View answer

Correct Answer: A

Question #217

The Investment Company Institute reported in its Mutual Fund Fact Book that the number of mutual funds increased from 410 in 1985 to 857 in 1995. What is the geometric mean annual percent increase in the number of funds?

A. 8

B. one of these answers

C.

D. 9

E.

View answer

Correct Answer: E

Question #218

A survey of 144 retail stores revealed that a particular brand and model of a VCR retails for $375 with a standard deviation of $20.If 95% and 98% confidence intervals are developed to estimate the true cost of the VCR, what difference would they have?

A. nterval widths

B. -variates

C. one of these answers

D. oth interval widths and z-variates

E. tandard errors

View answer

Correct Answer: D

Question #219

The following information was obtained from the financial statements of Firm A:Current assets = $4,500Current liabilities = $3,000Long-range assets = $150,000Long-term liabilities = $42,000Contributed capital = $31,000Then, the retained earnings of the firm equal ________.

A. 39,000

B. 31,000

C. 78,500

D. 123,500

View answer

Correct Answer: C

Question #220

The lengths of time (in minutes) several underwriters took to review applications for similar insurance coverage are: 50, 230, 52 and 57. What is the median length of time required to review an application?

A. 41

B. 4

C. one of these answers

D. 09

E. 7

View answer

Correct Answer: B

Question #221

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

A. omposite

B. ultiple

C. ash

D. verage

View answer

Correct Answer: C

Question #222

Which of the following statements is false in reference to confidence intervals and/or tests of significance?

A. s the confidence level increases, the area between the upper confidence limit and the lower confidence limit increases

B. ore than one of these answers is false

C. he significance level is denoted by the Greek letter alpha

D. he significance level is typically measured by (1 - the probability of a Type II error)

E. s the confidence level increases, the power of the does not necessarily increase

View answer

Correct Answer: D

Question #223

According to the AIMR-PPS for venture and private placements, ________ internal rate of return must be presented since inception of the fund and be net of fees, expenses and carry to the limited partner.

A. imited

B. xtended

C. umulative

D. eneral

View answer

Correct Answer: C

Question #224

MacDonald Inc. reported net income of $300,000 for 1996. Changes occurred in several balance sheet accounts as follows:Equipment $25,000 increaseAccumulated depreciation 40,000 increaseNote payable 30,000 increaseAdditional information:During 1996, MacDonald sold equipment costing $25,000, with accumulated depreciation of $12,000, for a gain of $5,000.In December 1996, MacDonald purchased equipment costing $50,000 with $20,000 cash and a 12% note payable of $30,000.Depreciation expense for the year was $52,

A. 12,000

B. 18,000

C. 20,000

D. 32,000

E. 2,000

View answer

Correct Answer: E

Question #225

Standard III (C) deals with conflicts of interest of a member with ________.

A. olleagues at the same firm

B. he employer

C. one of these answers

D. he client

E. ther investment professionals

View answer

Correct Answer: B

Question #226

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 #227

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 #228

Stock dividends have the greatest impact on which section of the balance sheet?

A. he components of stockholders' equity

B. otal stockholders' equity

C. otal assets

D. otal assets and total stockholders' equity

E. etained earnings

View answer

Correct Answer: A

Question #229

What gives the home currency price of a certain quantity of the foreign currency quoted?

A. id-ask spread

B. pot rate

C. ross rate

D. irect quotation

E. ndirect quotation

View answer

Correct Answer: D

Question #230

Eternal Life Insurance has a policy that will pay $50,000 per year starting 20 years from now, to you and all your progeny. If the appropriate discount rate is 10% per year and you have to pay premiums every year for the next 15 years starting at the end of this year, what's the annual premium payment that you and your heirs must make for this to be a fair deal?

A. 10,749

B. 14,495

C. 9,771

D. 12,189

View answer

Correct Answer: A

Question #231

An unfortunate consequence of ________ and monetary instability is that people spend less time producing and more time trying to protect their wealth.

A. nemployment

B. ll of these answers

C. onetary contraction

D. nflation

E. one of these answers

View answer

Correct Answer: D

Question #232

If you buy a television for $650 and agree to pay for it with 24 monthly payments of $33, beginning next month, what annual interest rate, compounded monthly, are you being charged?

A. 5

B. 1

C.

D. 8

E. 9

View answer

Correct Answer: E

Question #233

All of the following are sources of creditor financing except:

A. anks

B. ccounts payable

C. mployees who receive pay in arrears

D. hareholders who receive no dividends

View answer

Correct Answer: D

Question #234

The following are all true concerning transactional analysis, except,

A. t can be used to convert indirect method cash flow from operations to the direct method

B. t is a technique that can be used to create a cash flow statement for firms that do not prepare such statements in accordance with SFAS 95 and IAS 7

C. t helps to understand the relationship between the accrual of revenues, expenses, assets, and liabilities and their cash flow consequences

D. t is a method that groups changes in the current assets and current liabilities and reconciles them to the relevant income statement items

E. t is a method that classifies cash flows among operating, financing, and investing activities

View answer

Correct Answer: D

Question #235

If you owe $5,000 today and will repay it with 8 annual payments of $900 beginning next year, what is the annual interest rate, compounded annually, that you are paying?

A.

B.

C. 8%

D.

E. 4%

View answer

Correct Answer: D

Question #236

What is the remaining balance on a $90,000 loan after making monthly payments of $660.39 for 10 years, if the interest rate is 8% per year, compounded monthly?

A. 51,948

B. 81,343

C. 0

D. 76,204

E. 78,951

View answer

Correct Answer: E

Question #237

Which of the following are formulas for sample variance?

A. 1/(n-1)] * sum (as i goes from 1 to n) of (X_i - Xbar)^2

B. only

C. one of these answers is correct

D. II only

E. I only

View answer

Correct Answer: B

Question #238

If you buy a house costing $120,000 and pay for it over 30 years, what is your monthly payment, if your loan's interest rate is 7% per year, compounded monthly and the first payment is due next month?

A. 4,371

B. 8,400

C. 798

D. 665

E. 804

View answer

Correct Answer: C

Question #239

In a given year, Gondolpha had total imports of 976 and total exports of 734. It also made direct foreign investments of 297. There were no other transactions on the BOP account. The Official Reserves account:

A. ecreases by 1,413

B. ncreases by 539

C. ecreases by 539

D. ecreases by 55

View answer

Correct Answer: C

Question #240

Jorge FuIIen is evaluating a 7% 10-year bond that is callable at par in 5 years. Coupon payments can be reinvested at an annual rate of 7%, and the current price of the bond is $106.50. The bond pays interest semiannually. Should Fullen consider the yield to first call (YTC) or the yield to maturity (YTM) in making his purchase decision?

A. TM, since YTM is greater than YTC

B. TC, since YTC is less than YTM

C. TC, since YTC is greater than YTM

View answer

Correct Answer: B

Question #241

The heights of the five members in a family have been measured and found to be (in centimeters):146, 162, 165, 187, 152The range and the mean deviation of the heights are:

A. 1, 46

B. 1, 54

C. 1, 10

D. 9, 61

View answer

Correct Answer: C

Question #242

When compared to the percentage-of-completion method, the completed contract method

A. eports larger total assets

B. eports higher net assets

C. eports higher cash flows

D. eports income earlier

E. ses higher estimates of selling prices

View answer

Correct Answer: A

Question #243

A bell-shaped, symmetrical frequency distribution has a mean of 10. If 16% of the observations in the distribution are negative, what is the coefficient of variation of X?

A.

B.

C. 0

D.

View answer

Correct Answer: A

Question #244

You are examining a portfolio composed of 10% money-market investments, 30% bonds, and 60% stocks. Last year, the return on the money-market investments was 4%; the return on bonds was 6%, and the return on stocks was 7%. What is the portfolio weighted average return?

A.

B.

C.

D. one of these answers is correct

View answer

Correct Answer: C

Question #245

The ________ assumption must be disclosed if results are presented after taxes.

A. omposite

B. ax rate

C. ettlement-date

D. election

E. rade

View answer

Correct Answer: B

Question #246

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

A. one of these answers

B. 1,500

C. 3,000

D. $4,500)

View answer

Correct Answer: B

Question #247

Increasing which factor in the dividend discount model, without changing the other two, would be least likely to increase a stock's price-to-earnings (P/E) ratio?

A. he expected dividend payout ratio

B. he required rate of return on the stock

C. he expected constant growth rate of dividends

View answer

Correct Answer: B

Question #248

In reference to AIMR-PPS, which of the following is/are true?

A. f the valuation of an investment asset is not based on current market value, it should not be included in total assets to which PPS are being applied

B. , II and III

C. and III only

D. I and III only

E. I only

View answer

Correct Answer: A

Question #249

What do we call the conditions under which the null hypothesis is not rejected?

A. ritical value

B. ecision rule

C. lternate hypothesis

D. one of these answers

E. est statistic

View answer

Correct Answer: B

Question #250

For a one-tailed hypothesis test, the critical value of the test statistic is -2.33. Which of the following is true about the hypothesis test?

A. lpha =

B. lpha =

C. lpha =

D. lpha =

E. one of these answers

View answer

Correct Answer: D

Question #251

If the economy is producing less than the full-employment output level, which of the following would most likely direct the economy back to long-run equilibrium?

A. decrease in resource prices

B. n increase in the real rate of interest

C. n increase in resource prices

D. n increase in technology

View answer

Correct Answer: A

Question #252

Exports of goods (merchandise) and services minus the imports of goods and services equals ________.

A. urrent account

B. alance of merchandise trade

C. alance on current accounts

D. alance on goods and services

View answer

Correct Answer: D

Question #253

A drawback of using the price-to-book value ratio as a valuation tool is that book value:

A. oes not reflect human capital

B. s not appropriate for valuing firms with large, highly liquid assets

C. s only effective in valuing companies that are not expected to continue as a going concern

View answer

Correct Answer: A

Question #254

When a firm's inventory undergoes LIFO liquidation under rising prices, it experiences ________.

A. igher income and higher cash flows

B. igher income and lower cash flows

C. ower income and lower cash flows

D. ower income and higher cash flows

View answer

Correct Answer: B

Question #255

Which of the following is a valid reason for an analyst to question the value of a deferred asset or justify capitalizing it?

A. apid product obsolescence

B. ver estimation of future sales

C. ll of these answers

D. he proper amortization might be substantially shorter that the one selected by management

E. on-existence of future benefits

View answer

Correct Answer: C

Question #256

JonesCorp just entered into a plain vanilla interest rate swap as the fixed-rate receiver. The swap has a tenor of four years and makes payments quarterly on a netted basis. At the time the swap was initiated the LIBOR term structure was flat causing LIBOR to be equal to the swap fixed rate. Under which of the following circumstances would JonesCorp be required to make a future net payment to the swap counterparty?

A. he LIBOR term structure becomes upward sloping

B. he LIBOR term structure remains flat but shifts down

C. he LIBOR term structure becomes downward sloping

View answer

Correct Answer: A

Question #257

According to Standard IV (B.4), Priority of Transactions: "Transactions for clients and employers shall have priority over transactions in securities or other investments of which a member is the ________ so that such personal transactions do not operate adversely to their clients' or employer's interests."

A. aterial agent

B. rimary decision maker

C. one of these answers

D. roxy voter

E. eneficial owner

View answer

Correct Answer: E

Question #258

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

A. ore than one of these answers is correct

B. he specification of a confidence level is the third step in the hypothesis testing process

C. etermining the significance level of a hypothesis test after calculating the test statistic can lead to an erosion of objectivity

D. he significance level is denoted by the Greek letter theta

E. he confidence level can be found by (1 - the probability of a Type I error)

View answer

Correct Answer: D

Question #259

A sample of the monthly amounts spent for food by families of four receiving food stamps approximates asymmetrical distribution. The sample mean is $150 and the standard deviation is $20. About 95 percent of the monthly food expenditures are between what two amounts?

A. one of these answers

B. 110 and $190

C. 205 and $220

D. 85 and $105

E. 100 and $200

View answer

Correct Answer: B

Question #260

Accounting Standards are best described as

A. he state-of-the-art presentation of the science of accounting

B. resentation standards mandated by the Securities and Exchange Commission

C. he result of a political process among groups with diverse interests

D. easuring the quality of stewardship

View answer

Correct Answer: C

Question #261

If the significance level of a test is the probability of incorrectly rejecting the null hypothesis, then the "power of a test" is defined as which of the following? Choose the best answer.

A. he probability of a Type II error

B. ore than one of these answers is correct

C. he "power of a test" is a nonsensical term

D. he probability of incorrectly accepting the alternate hypothesis

E. he probability of correctly rejecting the null

View answer

Correct Answer: E

Question #262

In the successful effort method, oil firms:

A. re required to expense all oil-drilling costs resulting in dry holes

B. only

C. & II

D. II & IV

E. I only

View answer

Correct Answer: B

Question #263

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

A. ll-cash basis i

B. oth actual returns and all-cash basis

C. one of these answers

D. ctual returns

View answer

Correct Answer: B

Question #264

Sharon Foster owns a portfolio of two bonds. The first bond is a mortgage backed security (MBS) with a coupon rate well above current market rates for securities with similar characteristics. Foster also owns a callable corporate bond with five years to maturity and a coupon rate of 9%. The bond is nonrefundable. Comparable corporate issues brought to market recently were priced to yield 6.5%. The risks that Sharon faces by holding each of these securities could best be described as:

A. nterest rate risk for the MBS, and call risk for the corporate bond

B. rice compression for the MBS, and reinvestment risk for the corporate bond

C. repayment risk for the MBS, and call risk for the corporate bond

View answer

Correct Answer: C

Question #265

With regard to international portfolios, if net performance is indicated, managers are required to disclose the assumed ________ for the benchmark.

A. ax rate

B. urrency effects

C. edge

D. isclosure

E. ifferentials

View answer

Correct Answer: A

Question #266

When the economy is in short-run equilibrium below potential output, then

A. ctual unemployment will be greater than the natural unemployment

B. he natural unemployment will decline

C. he economy will be unable to sustain output in the long run

D. ctual unemployment will be less than the natural unemployment

E. strong demand for resources will place upward pressure on resource prices

View answer

Correct Answer: A

Question #267

According to the AIMR-PPS, subsectors or carve-outs of larger international composites

A. ay be used to create stand-alone composites only if the subsectors are actually managed as separate entities, they need not have their own cash allocations or currency management

B. ay be used to create stand-alone composites only if the subsectors are actually managed as separate entities with their own cash allocations and currency management

C. ay never be included in the composite with the parent company

D. ay never be used to create stand-alone composites under any circumstances

View answer

Correct Answer: B

Question #268

The opinion paragraph of an independent auditor's report begins, "In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position..." This language states ________.

A. n unqualified opinion

B. disclaimer of opinion

C. one of these answers

D. qualified opinion

E. n "except for" opinion

View answer

Correct Answer: A

Question #269

Susan Jackson, with HRS Investments, is appearing in court as an expert witness. She will have to use research done at HRS, to which she did not contribute directly, during her testimony. Which of the following is true, in relation to Jackson's need to comply with Standard II (C)?

A. ackson is representing herself and may or may not attribute any of HRS's research

B. ackson is representing HRS and must attribute any of HRS's research

C. ackson is representing herself and must attribute any of HRS's research

D. here is not enough information given to answer this question

E. ackson is representing HRS and may or may not attribute any of HRS's research

View answer

Correct Answer: C

Question #270

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

A. 55,000

B. 48,000

C. 54,000

D. 58,000

View answer

Correct Answer: B

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