Updated CFA Level II Exam Dumps – Your Path to Success

Question #1

What is the annual Internal Rate of Return of this series of annual cash flows: Year 0: <$15,000>, Year 1:$2,000, Year 2: $0, Year 3: $15,000, Year 4 to indicate a negative number).

A. 5

B. 8

C. 0

D. 2

E. 5

View answer

Correct Answer: E

Question #2

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

A. nsider

B. iversification

C. rohibited

D. one of these answers

E. ommitment

View answer

Correct Answer: C

Question #3

A coefficient of skewness of +2.48 indicates:

A. ll of these answers are correct

B. he mean is larger than the median

C. he tail of the distribution is to the right

D. one of these answers are correct

E. large positive skewness

View answer

Correct Answer: A

Question #4

Under a periodic inventory system, how is COGS determined?

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

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

C. nding inventory is counted and subtracted from beginning inventory

D. one of these answers

View answer

Correct Answer: A

Question #5

The Performance Presentation Standards ________ require retroactive compliance.

A. ever

B. lways

C. ometimes

View answer

Correct Answer: C

Question #6

The sampling method in which a sample is selected by first dividing the population into groups and then selecting members from each group is known as:

A. imple random sampling

B. tratified random sampling

C. luster sampling

D. ystematic random sampling

View answer

Correct Answer: B

Question #7

Which is true of positively skewed distributions?

A. hey have a limited, but frequent, upside

B. II

C. and II

D. I

E. and III

View answer

Correct Answer: A

Question #8

Which of the following is/are problems with comparing firm ratios with industry ratios?

A. he firm under consideration may not be a typical firm in the industry

B. , II, III & IV

C. , III & IV

D. , II & III

E. & III

View answer

Correct Answer: D

Question #9

The probability that a technology stock will fall in price over the next 12 months, given a decline in consumer confidence over the same period, is called:

A. n unconditional probability

B. conditional probability

C. joint probability

D. likelihood

View answer

Correct Answer: B

Question #10

Michelle Garcia, CFA, is analyzing two newly issued corporate debt securities for possible purchase by a client. Bond X is a noncallable 10-year coupon bond currently trading at 102.50. Bond Y is a noncallable 10-year coupon bond currently trading at 98.25. Garcia wants to ensure that her client is fully aware of any probable changes in the bonds' values as they approach maturity. Holding interest rates constant, which of the following best describes how each bond's price will change as it approaches maturi

A. he price of both bonds will decrease

B. he price of Bond X will decrease, and the price of Bond Y will increase

C. he price of Bond X will increase, and the price of Bond Y will decrease

View answer

Correct Answer: B

Question #11

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

A. X - E(X))*(Y - E(Y))

B. [(X - E(X))*(Y - E(Y))]

C. [(X + E(X))*(Y + E(Y))]

D. [XY - E(XY)]

View answer

Correct Answer: B

Question #12

Samples of the wires coming off the production line were tested for tensile strength. The statistical results (in PSI) were:Mean = 500Median = 500Mode = 500Standard deviation = 40Mean deviation = 32Quartile deviation = 25Range = 240Number is sample = 100The middle 95 percent of the wires tested between approximately what two values?

A. 50 and 550

B. 20 and 580

C. 80 and 620

D. 60 and 540

E. one of these answers

View answer

Correct Answer: B

Question #13

When a marketable security's classification is changed, which of the following apply?

A. he transfer is accounted for at the amortized historical cost of the security

B. & II

C. , II & III

D. II only

E. & III

View answer

Correct Answer: C

Question #14

What incentives does inflation create in consumers and producers?

A. onsumers will save less and producers will invest more

B. onsumers will spend more and producers will produce more

C. onsumers will save more and producers will produce more

D. onsumers will spend more and producers will sell off inventories

E. onsumers will spend less and producers will lay off workers

View answer

Correct Answer: B

Question #15

Which of the following items is deducted from net income to arrive at cash flow from operations when using the indirect method?

A. epreciation expense

B. ecrease in accounts receivable

C. ecrease in accounts payable

D. mortization expense

View answer

Correct Answer: C

Question #16

If you deposit $400 today into an account paying 8% per year, compounded quarterly, how much will be in the account after 42 months?

A. 10,135

B. 1,174

C. 918

D. 927

E. 527

View answer

Correct Answer: E

Question #17

Events X and Y are mutually exclusive. P(X) = 0.15, P(Y) = 0.32. The probability of either X or Y occurring equals ________.

A.

B.

C.

D.

View answer

Correct Answer: C

Question #18

An expansionary fiscal policy causes which of the following effects?

A. he domestic currency depreciates

B. I, III & IV

C. , II & III

D. , II, III & IV

E. & III

View answer

Correct Answer: B

Question #19

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

A. 4

B. 5

C. 1

D. 5

E. 2

View answer

Correct Answer: B

Question #20

Which of the following statements is false?

A. eal GDP excludes earnings by domestic citizens abroad

B. he change in real GDP plus the inflation rate equals growth in nominal GDP

C. hanges in nominal GDP include the impact of changes in the money supply

D. eal GDP measures strictly changes in national output

E. hange in nominal GDP is always greater than the change in real GDP

View answer

Correct Answer: E

Question #21

When the output of an economy exceeds the economy's full-employment capacity, then

A. ggregate supply will increase until the economy can produce the output at the existing price level

B. ggregate demand will decline until full-employment equilibrium is restored at a lower price level

C. nemployment will exceed the economy's natural unemployment

D. ages and prices will rise until full employment is restored at a higher price level

View answer

Correct Answer: D

Question #22

Under a monetary expansion, aggregate demand can be expected to ________.

A. tay the same

B. ise

C. all, then rise

D. all

E. ise, then fall

View answer

Correct Answer: B

Question #23

How does inflation impact interest rates, all else equal?

A. ncreases the real rate; increases the nominal rate

B. as no direct impact on interest rates

C. as no effect on the real rate; increases the nominal rate

D. ncreases the real rate; has no effect on the nominal rate

E. mpossible to determine

View answer

Correct Answer: C

Question #24

You are examining a group of 20 mutual funds. You find that 5 have an 8% position in foreign stocks, 7 have a 9% position in foreign stocks, and 8 have no position in foreign stocks. What is the weighted average position in foreign stocks of these 20 mutual funds?

A.

B.

C.

D.

View answer

Correct Answer: D

Question #25

Which of the following AIMR Standards states that additional compensation agreements must be disclosed to the employer?

A. V

B. II (D)

C.

D. I (B)

View answer

Correct Answer: B

Question #26

Which of the following statements is NOT correct?

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

B. ll of these statements are correct

C. tandards II through V address specific conduct

D. tandard I sets forth minimum standards relating to general activities

View answer

Correct Answer: A

Question #27

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

A. otal assets

B. otal stockholders' equity

C. otal assets and total stockholders' equity

D. etained earnings

E. he components of stockholders' equity

View answer

Correct Answer: E

Question #28

What is the annual Internal Rate of Return of this series of annual cash flows: Year 0: <$10,000>, Year 1:$5,000, Year 2: $5,000, Year 3: $7,500? (Note that the <> are used to indicate a negative number).

A. 1

B. 1

C. 4

D. 0

E. 8

View answer

Correct Answer: A

Question #29

Suppose the probability that electricity prices will rise any given quarter is 0.60, and the probability that oil prices will stay level or decline is 0.40. If electricity prices rise, corporate profits will decline by 2% with 90% probability, and increase by 0.5% with 10% probability. If electricity prices decline or stay level, corporate profits will increase 3% with a 65% probability and decline 0.5% with a 35% probability. What is the expected change in corporate profits in the next quarter?

A. 0

B. 0

C. 0

D. 0

View answer

Correct Answer: B

Question #30

Arbliss, an AIMR member, has been working for a financial software company, Supersoft Corp. for the past 3 years. He now wants to leave the firm and start his own software proprietorship. Which of the following will not constitute a violation of the AIMR code?

A. aking arrangements to set up the proprietorship prior to leaving current employment, without Supersoft knowing about it

B. only

C. II only

D. I and III only

E. and III only

View answer

Correct Answer: A

Question #31

Which of the following is/ are true?

A. oubling every single value in a sample doubles the sample mean

B. only

C. & III

D. , II & III

E. I only

View answer

Correct Answer: A

Question #32

Employers' income tax expense consists of the following obligations except:

A. ederal Income Tax

B. ocial Security Tax

C. tate Unemployment Tax

D. edicare Tax

View answer

Correct Answer: A

Question #33

Dayon Grimley has been working as a Tech Sector analyst with an advisory firm for the past 3 years. Recently, he read an analytical report by Sam Swetson about the trends and research developments in the computer chips industry. The report was an in-depth analysis of how the industry had developed, where it seemed to be headed and what impact the developments could have on the growth of the entire industry. In a footnote, Sam had speculated about a secret, ultra-fast chip rumored to be under development by

A. iolated Standard II (C) - Prohibition against Plagiarism

B. I and IV only

C. I and IV only

D. and IV only

E. and III only

View answer

Correct Answer: C

Question #34

A manager who pays a higher commission than would normally be paid to purchase the goods or services is said to be ________ services.

A. xploiting

B. ndercharged for

C. aying up for

D. ee-bound for

E. one of these answers

View answer

Correct Answer: C

Question #35

The annual income and expense figures for a proposed property under consideration for purchase, along with some recent sales data, are given below.The appraised value for the proposed property using the income approach is closest to:

A. 1,268,125

B. 1,504,375

C. 1,623,200

View answer

Correct Answer: B

Question #36

Bill Foley, CFA, manages an intermediate tax-exempt bond fund. Foley makes the following two comments about securities in his portfolio.Statement 1:Revenue bonds usually pay a higher coupon rate than general obligation bonds. Statement 2:Double barreled bonds are municipal securities that are exempt from both federal and state taxes. Which of the following best evaluates Statement 1 and Statement 2?

A. nly Statement 1 is correct

B. nly Statement 2 is correct

C. oth Statements are incorrect

View answer

Correct Answer: A

Question #37

Consider the following three investments:Future valueyearsinterest rate1.$50,000 89% per year2.$20,000 612% per year3.$35,000 37% per yearThe present values of the 3 investments are:

A. 28,193, $12,145, $31,422

B. 99,628, $39,476, $42,877

C. 25,093, $10,133, $28,570

D. 24,192, $11,876, $27,864

View answer

Correct Answer: C

Question #38

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

A. 277

B. 436

C. 359

D. 348

E. 778

View answer

Correct Answer: D

Question #39

A firm has net sales of $6,000 in fiscal 1998, cash expenses (including taxes) of $2,800, and depreciation of $1,000. If accounts receivable increased in the period by $800, cash flows from operations equal ________.

A. 2,400

B. 3,200

C. 3,400

D. 4,200

View answer

Correct Answer: A

Question #40

What is the annual Internal Rate of Return of this series of annual cash flows: Year 0: <$6,000>, Year 1:$4,000, Year 2: $3,000, Year 3: $2,000, Year 4: $1,000 (Note that the <> are used to indicate a negative number).

A. 5

B. 7

C. 4

D. 1

E. 3

View answer

Correct Answer: D

Question #41

Standard III includes which of the following?

A. erformance Presentation

B. ll of these answers

C. one of these answers

D. easonable Basis and Representations

E. isclosure of Additional Compensation Arrangements

View answer

Correct Answer: E

Question #42

When a manager is responsible for the portfolios of pension plans or trusts, the duty of loyalty is owed to the ________.

A. ntity who hires the manager

B. orporation

C. one of these answers

D. anager's supervisor(s)

E. tockholders of the firm

View answer

Correct Answer: C

Question #43

The matching principle requires that

A. on-operating gains and losses should be netted against each other

B. proportion of each dollar collected will be assumed to be a recovery of cost

C. evenues earned and expenses incurred in generating those revenues should be reported in the same income statement

D. ssets will be matched to the liabilities incurred to purchase them

View answer

Correct Answer: C

Question #44

Two junior portfolio managers at ContraFunds, a hedge fund manager, have been asked to summarize the mechanics of utilizing futures contracts for the firm's training manual. The first manager, Tina Kent, submits a paragraph explaining that administering a futures position will require bringing the margin account balance back to the initial margin level by posting maintenance margin any time the balance falls below the variation margin level. The second manger, Martin Ramsey, submits a paragraph explaining m

A. nly Kent is correct

B. nly Ramsey is correct

C. either is correct

View answer

Correct Answer: B

Question #45

Which of the following is NOT an operating efficiency ratio?

A. sset turnover

B. quity turnover

C. ales-to-assets ratio

D. perating profit margin

View answer

Correct Answer: D

Question #46

A firm has convertible bonds, preferred equity, common equity and straight bonds in its capital structure. In calculating Diluted EPS, which of the following is true about the earnings number used, assuming the convertible bonds are dilutive?

A. arnings used = Net income - preferred dividends + interest payments on convertible

B. arnings used = Net income - preferred dividends - interest payments on convertible net of taxes

C. arnings used = Net income - preferred dividends - interest payments on convertible before taxes

D. arnings used = Net income - preferred dividends + interest payments on convertible net of taxes

View answer

Correct Answer: D

Question #47

Which of the following is/are true about insider trading laws?

A. orporations cannot discriminate amongst recipients without risking insider trading liability

B. only

C. & II

D. , II & III

E. I & III

View answer

Correct Answer: B

Question #48

A random variable can take on four values: 12, 36, 78, 111, each with probability 0.25. The standard deviation of the random variable equals ________.

A. 52

B. 9

C. ,451

D. 8

View answer

Correct Answer: D

Question #49

The classification guidelines of SFAS 95 have not created problems for analysts of the cash flow statement in the following area

A. ifferences due to some accounting methods

B. oncash transactions

C. ong-term borrowings

D. nterest and dividends received

E. nterest paid

View answer

Correct Answer: C

Question #50

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

A. 366

B. 250

C. 104

D. 273

E. 116

View answer

Correct Answer: D

Question #51

When a business is acquired, the purchasing company calculates goodwill associated with the acquisition as the difference between the purchase price and the ________.

A. ook value of the identifiable net assets acquired

B. ook value of the net tangible assets acquired

C. air value of the net tangible assets acquired

D. ook value of the total assets acquired

E. air value of the identifiable net assets acquired

View answer

Correct Answer: E

Question #52

Andy Pilling is a bond trading specialist who recently started a special fund, the "Structured Bond Fund." The strategy behind this fund is quite complex, involving a mix of highly speculative, high-yield bonds and various tax-free municipal bonds for some stability. Andy has a strong view that the economy will remain vibrant and bullish over the next two years and hence, is not worried about the risky bonds. Assuming a falling rate scenario in this case allows the fund to project an expected return 130 bas

A. ot violated any standards in the AIMR Code of Ethics

B. iolated Standard IV (6) - Prohibition Against Misrepresentation

C. iolated Standard IV (A

D. iolated Standard IV (B

View answer

Correct Answer: C

Question #53

Which of the following is not a characteristic of a binomial probability distribution?

A. robability of success remains constant from trial to trial

B. ach outcome results from two trials

C. ach trial is independent

D. ll of these answers are characteristics of the binomial distribution?

E. ach outcome is mutually exclusive

View answer

Correct Answer: B

Question #54

Type II error refers to the event that we will:

A. ail to reject the null when it is false

B. ccept the alternative when it is false

C. eject the null when it is true

D. eject the alternative when it is true

View answer

Correct Answer: A

Question #55

Which of the following transactions will impact a company's balance sheet?

A. he payment of principal on a long-term loan

B. he sale of new common stock

C. et income earned by a company

D. ll of these answers

E. he purchase of equipment for cash

View answer

Correct Answer: D

Question #56

The current price of a $1,000 par value, 6-year, 4.2% semiannual coupon bond is $958.97. The bond's PVBP is closest to:

A. 0

B. 4

C. 5

View answer

Correct Answer: A

Question #57

Suppose you need $500 in 20 months. How much must you deposit today, if the deposit will earn interest at 8% per year, compounded monthly?

A. 2,330

B. 437

C. 571

D. 249

E. 107

View answer

Correct Answer: B

Question #58

What annual interest rate, compounded annually, will cause a deposit of $550 to become $1,475 in 15 years?

A.

B.

C.

D. 7

E.

View answer

Correct Answer: E

Question #59

The constant-growth dividend discount valuation model states that the fair price of a share of common equity is determined by dividing next period's forecasted dividend by the difference between the cost of equity capital and the firm's long-term sustainable growth rate. Using this relationship, the cost of equity capital can alternatively be stated as:

A. /V + g

B. FR-(+ RFR)

C. xpected growth rate of dividends minus required rate of return

View answer

Correct Answer: A

Question #60

Rebecca Dustin, a freelance research analyst, is currently working on a research study on the pharmaceutical industry for KLM Brokerage. She has been using KLM's research facilities in this endeavor. There has been no written agreement between Rebecca and KLM about the project, though there was a verbal agreement that KLM would provide reasonable support for the research. In return, KLM would pay for the final report in case she uncovers something worthwhile. Rebecca is now interviewing with Jacob & Associa

A. ot be violating the AIMR code, because she is the owner of the study

B. e violating Standard III (B) - Duty to Employer - because KLM has property rights over the study

C. e violating Standard III (B) - Duty to Employer - because KLM has first rights over the study

D. ot be violating the AIMR code, since she is not under any written obligation to KLM

View answer

Correct Answer: C

Question #61

A sample of the amounts spent to heat all-electric homes of similar sizes in March revealed these amounts (to the nearest dollar): $212, $191, $176, $129, $106, $92, $108, $109, $103, $121, $175 and $194. What is the range?

A. 130

B. 100

C. 120

D. one of these answers

E. 112

View answer

Correct Answer: C

Question #62

An analyst is evaluating an annual-pay bond with a yield to maturity of 7.0%. The bond-equivalent yield of this bond is:

A. qual to 7

B. ess than 7

C. reater than 7

View answer

Correct Answer: B

Question #63

If you deposit $1,400 today into a savings account paying 8% per year, compounded semiannually, how much is in your account in 5 years?

A. 2,072

B. 1,587

C. 2,487

D. 1,330

E. 1,857

View answer

Correct Answer: A

Question #64

A bond does not pay initial coupon payments but instead accrues them over a pre-determined period and then pays a lump sum at the end of that period. The bond subsequently pays regular coupon payments until maturity. Such a bond is best described as:

A. step-up note

B. zero-coupon bond

C. deferred-coupon bond

View answer

Correct Answer: C

Question #65

Which of the following temporary differences will result in a deferred tax asset?

A. nstallment sale profits accounted for on the accrual basis for financial statement purposes and on a cash basis for income tax purposes

B. repaid expenses accounted for on the accrual basis for financial statement purposes and on a cash basis for income tax purposes

C. se of the straight-line depreciation method for financial statement purposes and the Modified Accelerated Cost Recovery System (MACRS) for income tax purposes

D. one of these answers

E. dvance rental receipts accounted for on the accrual basis for financial statement purposes and on a cash basis for tax purposes

View answer

Correct Answer: E

Question #66

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

A.

B.

C.

D.

View answer

Correct Answer: A

Question #67

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 9%, and the return on stocks was -11%. What is the portfolio weighted average return?

A. 3

B. 4

C. one of these answers is correct

D. 3

View answer

Correct Answer: C

Question #68

Which of the following statements about ratios is false?

A. nalysis of ratios can identify areas that require further investigation

B. ll of these answers are true

C. ratio expresses a mathematical relation between two, or more, economically important quantities

D. he advantage of ratio analysis is that very little skill is required in interpreting the meaning of the ratios

E. atios must be interpreted with care since factors affecting the numerator can correlate with those affecting the denominator

View answer

Correct Answer: D

Question #69

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 90% level of confidence?

A.

B.

C. one of these answers

D.

E.

View answer

Correct Answer: E

Question #70

When a trustee for private investment funds has responsibility toward current beneficiaries who are income oriented and future beneficiaries ("remaindermen") who are capital growth oriented, she has primary fiduciary duty toward:

A. oth have to be treated on the same footing

B. he income beneficiaries

C. he remaindermen

D. nsufficient information

View answer

Correct Answer: A

Question #71

What amount would you have in your savings account in 5 years, if it has a balance of $1,234 today and you deposit an additional $1,234 two years from today? Assume that the savings account earns 5% per year, compounded annually.

A. 10,048

B. 3,003

C. 2,468

D. 2,999

E. 3,149

View answer

Correct Answer: B

Question #72

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

A. xpense account

B. evenue account

C. iability account

D. sset account

View answer

Correct Answer: B

Question #73

If you deposit $100 a month, beginning next month, for 8 years into an account paying 6% per year, compounded monthly, how much is in your account after that last deposit?

A. 13,678

B. 12,282

C. 9,600

D. 12,097

E. 23,585,957

View answer

Correct Answer: B

Question #74

If the resources of an economy were fully employed and the marginal propensity to consume were 0.75, a $10 billion increase in investment would cause

A. eal income to rise $40 billion

B. eal income to rise $80 billion

C. eal income to rise $20 billion

D. nflation to increase

View answer

Correct Answer: D

Question #75

Which of the following would occur prior to the completion of a long-term contract when using the completed- contract method as opposed to the percentage-of-completion method?

A. firm's current period income tax liability would be lowered

B. firm's current period profits would be greater

C. one of these answers

D. ll of these answers

E. firm's current period revenues would be greater

View answer

Correct Answer: A

Question #76

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

A. eighted average

B. IFO

C. ross profit method

D. IFO

View answer

Correct Answer: B

Question #77

What should an analyst look for when evaluating a firm's cash and cash equivalent position that would cause the firm's cash position to be less liquid?

A. he amount of stock dividends required during the coming year

B. one of these answers

C. ll of these answers

D. otential limitations on the use of cash such as restricted balances

E. he amount of deposit collection float

View answer

Correct Answer: D

Question #78

To fulfill the basic provisions of Standard IV (B.2), a member should ________.

A. tay free of all conflicts of interest

B. evelop an investment policy statement for each client

C. iscuss the proxy voting policy with management

D. isclose to clients, all additional compensation agreements

E. isclose all soft dollar arrangements

View answer

Correct Answer: B

Question #79

According to Say's law, there cannot be overproduction of goods and services because

A. verproduction will lead to higher unemployment, which will reduce production

B. emand creates its own supply

C. ess fortunate countries will always buy the excess output

D. roducing goods generates enough income to buy the total output

View answer

Correct Answer: D

Question #80

Under accrual accounting, revenues are recognized when:

A. ales are made

B. , II, & III

C. & IV

D. & III

E. I & III

View answer

Correct Answer: D

Question #81

Which of the following best describes a type II error?

A. he probability of incorrectly failing to reject the null hypothesis

B. 1 - the significance level)

C. he probability of incorrectly rejecting the null hypothesis

D. he power of a test

E. ore than one of these answers is correct

View answer

Correct Answer: A

Question #82

While comparing a firm that expenses costs with one that capitalizes them:

A. he capitalizing firm always shows higher cash flow from operations

B. I & III

C. , II & IV

D. I, III & IV

E. & IV

View answer

Correct Answer: B

Question #83

An investment of $100 grows in three years to $221. The investor observes that the annual arithmetic rate of return and the geometric rate of return were the same over this period. The annual arithmetic rate of return must be ________.

A. 0

B. 3

C. 0

D. 4

E. 7

View answer

Correct Answer: A

Question #84

David Garcia, CFA, is analyzing two bonds. Bond X is an option tree corporate security with a 7% annual coupon and ten years to maturity. Bond Y is a mortgage backed security that also matures in ten years. Garcia is considering two possible interest rate scenarios--one in which rates are flat over the entire 10-year horizon, and one in which the yield curve is sloped steeply upwards. For each bond, Garcia has calculated the nominal spread over the 10-year U.S. Treasury issue as well as the zero-volatility

A. or Bond X, when the yield curve is sloped steeply upwards

B. or Bond Y, when the yield curve is sloped steeply upwards

C. or Bond X, when the yield curve is flat

View answer

Correct Answer: B

Question #85

Two stocks have identical risk, but one of them offers a higher expected return than the other. This apparent inefficiency in the market:

A. ndicates that arbitrageurs must be unaware of the mispricing

B. ay persist and even grow larger before any correction occurs

C. an only arise when arbitrageurs lack the capital to exploit the situation

View answer

Correct Answer: B

Question #86

How long will it take for an initial deposit of $1,500 to grow to be $4,000, if the interest rate is 5% per year, compounded annually?

A. 6

B. 0

C. 7

D. 4

E. 4

View answer

Correct Answer: B

Question #87

What is the measure that indicates how precise a prediction of Y is based on X or, conversely, how inaccurate the prediction might be?

A. east squares principle

B. lope of the line

C. one of these answers

D. intercept

E. egression equation

View answer

Correct Answer: C

Question #88

An entity desiring to issue a fixed-income security has placed $10 million worth of loan receivables in a special purpose vehicle (SPV) that is completely independent of the company. Additionally, the credit rating agencies have suggested the entity secure a third-party guarantee in order to have the security rated AA

A. After completing the transfer of assets to the SPV and obtaining a letter of credit from a national bank, the entity issued the AAA-rated security

A. ommercial paper

B. nternational bonds

C. sset-backed securities

View answer

Correct Answer: C

Question #89

According to U.S. GAAP, the format of the income statement

A. ust include footnotes which detail particular income statement sections

B. ust not vary across different industries

C. ust include an "operating expenses" section

D. ust be identical in the reporting of equity in earnings of affiliates

E. s not specified

View answer

Correct Answer: E

Question #90

A firm's financial data show:Taxable income 1,500Taxes paid 500Non-cash operating expenses 780Bonds retired 700Loss on retired bonds 140Then, the financing cash flow equals ________.

A. 700

B. 840

C. 60

D. 900

View answer

Correct Answer: D

Question #91

Deferred taxes would be classified as

A. long-term borrowing

B. current liability

C. current asset

D. prepaid expense

E. tockholders' equity

View answer

Correct Answer: C

Question #92

An analyst is interested in determining the value of a real estate investment and has estimated the following data for the property:---------------------------------------------------------------------------------- Net operating income $50,480 Cost of debt 8.2%Depreciation $3,550 Cost of equity 12.5%Interest expense $2,720 WACC 9.6%Tax rate 35% Cap rate 11.0%---------------------------------------------------------------------------------- Which of the following is closest to the value of the property using

A. 403,900

B. 458,900

C. 466,500

View answer

Correct Answer: B

Question #93

An investment of $275 grows to $400 in 3 years. The holding period return is:

A.

B.

C.

D.

View answer

Correct Answer: C

Question #94

________ and other hybrid securities must be treated consistently across and within composites.

A. ortfolios

B. onvertibles

C. ssets

D. onds

View answer

Correct Answer: B

Question #95

A firm pays out half its earnings as dividends. If its net income is $50, then

A. ts assets increase by $25II

B. II & IV

C. & II

D. & IV

E. I & IV

View answer

Correct Answer: B

Question #96

Two sets of observations, A and B, each contain 160 observations. The variance of data in A equals 198.4 and that of the data in B equals 231.9. The two sets have the same mean. Then, A has a ________ dispersion and a ________ coefficient of variation.

A. igher; higher

B. ower; higher

C. ower; lower

D. igher; lower

View answer

Correct Answer: C

Question #97

Coleman Industries' stock is currently trading in the market for a price of $21. Three months ago, Myong Packard wrote a 6-month put option on 100 shares of Coleman stock for a premium of $3. The exercise price on the put option is equal to S25. The put option is now trading in the market for $5.25. Determine the moneyness of the put option.

A. ut-of-the money

B. n-the-money

C. t-the-money

View answer

Correct Answer: B

Question #98

Each month, the Bureau of Labor Statistics calculates unemployment by

A. aking projections based on census data

B. urveying large business and government employers

C. urveying all workers in the economy

D. urveying a random sample of households

View answer

Correct Answer: D

Question #99

Sanctions that AIMR may impose on its members include:

A. evocation of the member's registration as an investment advisor

B. I and IV only

C. and III only

D. I, III and IV only

E. , II, III and IV

View answer

Correct Answer: A

Question #100

A dividend that distributes more than 25% of the outstanding shares before the dividend is called:

A. liquidating dividend

B. llegal

C. large stock dividend

D. capitalizing dividend

View answer

Correct Answer: C

Question #101

Fred Fleming is considering working as a security analyst for Sector Investments. In the past, the firm has preferred to employ a top-down investment approach to analyzing potential investments. However, Fred prefers to use a bottom-up approach. Which of the following statements regarding the two analytical approaches ismost accurate?

A. undamental analysts only employ the bottom-up approach to security selection

B. nalysts using the top-down approach begin with forecasts of economic growth, interest rates, and inflation

C. he bottom-up approach emphasizes industry analysis for investment selection

View answer

Correct Answer: B

Question #102

Which of the following is/are true about monetary policy?

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

B. , II, III

C. II only

D. only

E. , III

View answer

Correct Answer: C

Question #103

________ risk is the risk that a bank will deliver currency on one side of a foreign exchange deal while the counterparty does not send any money in return.

A. rading

B. ettlement (Herstatt)

C. oreign Exchange

D. xchange

E. redit

View answer

Correct Answer: B

Question #104

Rocky Johnson, CFA, manages a large capitalization equity mutual fund. His superiors have requested that he provide them the appropriate benchmarks to compare future performance against. Johnson makes the following statements:Statement 1:We should use an unweighted index because it would best reflect the large company bias in the portfolio.Statement 2:Stocks in the portfolio frequently split the number of shares outstanding. Therefore, in the long run, the Dow Jones Industrial Average would best reflect the

A. o

B. tatement 1 is correct and Statement 2 is incorrect

C. tatement 1 is incorrect and Statement 2 is correct

View answer

Correct Answer: A

Question #105

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 classified as a maintenance employee?

A.

B.

C. one of these answers

D.

E.

View answer

Correct Answer: A

Question #106

Which of the following persons does AIMR hold most accountable for fiduciary duties owed to clients?

A. nvestment Advisors

B. rokers

C. one of these answers

D. ealers

View answer

Correct Answer: C

Question #107

A firm has just acquired a long-term asset with a useful life of 5 years. Its acquisition cost was $65,000 and its salvage value is estimated at $10,000. If the firm uses straight-line depreciation method, what's the depreciation expense recognized in Year 3?

A. 10,600

B. 14,500

C. 11,000

D. 13,000

View answer

Correct Answer: C

Question #108

How much will you have in an account two years from now if you start with $100 in it today and add $300 to it one year from now? Assume that interest is 6% per year, compounded annually.

A. 430

B. 424

C. 449

D. 372

E. 400

View answer

Correct Answer: A

Question #109

The following is referred to as the critical event in income determination:

A. ecording of revenues

B. ecording of changes in cash

C. ecording of changes in retained earnings during the period

D. ecording of expenses

View answer

Correct Answer: A

Question #110

Which of the following can be found in Standard I?

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

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

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

D. embers shall not participate in plagiarism

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 #111

________ states the range over which a population parameter likely lies.

A. point estimate

B. normal deviate

C. confidence interval

D. stratified range estimate

View answer

Correct Answer: C

Question #112

Which of the is/are true?

A. he probability of type II error equals 1 - significance level

B. I & IV

C. V only

D. & IV

E. II & IV

View answer

Correct Answer: A

Question #113

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

A. 1

B.

C.

D.

View answer

Correct Answer: C

Question #114

Carve-outs may not be combined with ________ portfolios.

A. ew

B. xchanged

C. tand-alone

D. omposite

E. enchmark

View answer

Correct Answer: C

Question #115

The z-value of a selected observation, X, from a normal distribution, also known as the normal deviate or the z- score of X, represents:

A. he probability that another observation from the distribution will be less than or equal to X

B. he probability that another observation from the distribution will be more than or equal to X

C. he distance of X from the mean, in terms of standard deviation

D. he distance of X from zero

View answer

Correct Answer: C

Question #116

If all the plots on a scatter diagram lie on a straight line, what is the standard error of estimate?

A. nfinity

B. one of these answers

C.

D. 1

E. 1

View answer

Correct Answer: C

Question #117

If you already have $500 in a savings account, how much must you deposit 4 years from now in order to have $5,000 in 8 years, assuming the account earns interest at 10% per year, compounded annually?

A. 4,500

B. 732

C. 2,683

D. 3,415

E. 2,332

View answer

Correct Answer: C

Question #118

Connery, a smart professional, passed his Level II CFA exam 2 years ago. He could not take the Level III exam due to professional time commitments elsewhere. He is thinking of taking Level III a couple of years from now, once things settle down on his personal front. His resume, which he has sent to a few prestigious firms, states that he is a candidate in the CFA program and has successfully completed Level II exam. He makes no exaggerated claims about his abilities on his resume. Connery has:

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

B. ot violated any standards

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

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

View answer

Correct Answer: C

Question #119

An economy is currently operating at full employment, with an inflation rate of 6%. The Central Bank adopts an inflationary measure consistent with an inflation rate of 8% but people anticipate an inflation of 7%. Then, the unemployment in the short run will be ________ the natural rate, as predicted by the Rational Expectations Model.

A. ould be above or below

B. ame as

C. elow

D. bove

View answer

Correct Answer: C

Question #120

An acceptable method for recognizing profit when the collection of cash is in doubt is the ________.

A. nstallment method

B. ercentage-of-completion method

C. onsignment method

D. roduction method

E. ompleted-contract method

View answer

Correct Answer: A

Question #121

If you deposit $250 a month, beginning next month, for 20 years into an account paying 7% per year, compounded monthly, how much is in your account after that last deposit?

A. 58,205

B. 308,663

C. 148,833

D. 147,577

E. 130,231

View answer

Correct Answer: E

Question #122

For a positively skewed, unimodal distribution, which of the following relationships holds?

A. ean < mode

B. ode < median

C. ean > median

D. ean < median

View answer

Correct Answer: C

Question #123

At the end of every year for the next 3 years, you deposit $400 in an account that pays 5% per year, annually compounded. After that, you do not make any more deposits. The amount that you can withdraw after 7 yearsis:

A. 1,533

B. 1,492

C. 1,917

D. 1,261

View answer

Correct Answer: A

Question #124

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 standard deviation of ROEs in this industry?

A.

B.

C.

D.

View answer

Correct Answer: A

Question #125

If the marginal propensity to consume (MPC) is .75 or 3/4, what is the expenditure multiplier?

A.

B.

C.

D.

View answer

Correct Answer: B

Question #126

Complete the following: According to The Code of Ethics, members of AIMR shall: "Practice and encourage others to practice in a professional and ethical manner that will ________ members and their profession."

A. mprove the qualifications of

B. eflect credit on

C. one of these answers

D. mprove the compensation of

E. mprove the access of

View answer

Correct Answer: B

Question #127

If you deposit $2,500 into an account paying 6% per year, simple interest, how much is in the account in 18 months?

A. 2,651

B. 2,725

C. 2,750

D. 2,349

E. 225

View answer

Correct Answer: B

Question #128

Level II verifiers must obtain and review ________ to ensure proper recording of cash flows.

A. nd of period returns

B. ccounting methods

C. ank reconciliation

D. ash flow statements

View answer

Correct Answer: C

Question #129

Which of the following statements is true?

A. tandard I sets forth minimum standards relating to general activities

B. ll of these statements are correct

C. embers are to be aware of laws and regulations of foreign jurisdictions

D. tandards II through V address specific conduct

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

View answer

Correct Answer: B

Question #130

A stock's return is normally distributed with a mean of 16% and a standard deviation of 8%. The probability that an investment in the stock will result in a loss in one year is approximately:

A. %

B.

C. annot be calculated

D. 0%

View answer

Correct Answer: B

Question #131

Which of the following would be the most likely reason to use ETFs instead of similar index funds?

A. ower market risk

B. ntraday valuation and trading

C. TFs do not experience tracking error

View answer

Correct Answer: B

Question #132

Which of the following is true with respect to extraordinary items?

A. xtraordinary items are recorded net of tax in income statement

B. and IV

C. , III and IV

D. I and IV

E. , II and III

View answer

Correct Answer: A

Question #133

Inflation is problematic for which of the following reasons

A. urchasing power declines at a faster rate than incomes riseII

B. , III

C. only

D. I, III

E. II only

View answer

Correct Answer: D

Question #134

If the senior members of an investment advisory firm are unwilling to disseminate negative information about a firm, the advisory should

A. one of these answers

B. efrain from making an investment recommendation citing proprietary reasons

C. isseminate only factual information about the firm and refrain from making any research comments

D. elease the report without the negative information

View answer

Correct Answer: C

Question #135

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

A. o allow earnings manipulation

B. I & IV

C. II only

D. & IV

E. & III

View answer

Correct Answer: A

Question #136

In computing skewness, which of the following is true?

A. t uses the cubed deviation from the mean

B. and III

C. I and III

D. , II, and III

E. one of these answers is correct

View answer

Correct Answer: C

Question #137

Which approach to probability is exemplified by the following formula? Prob. of Event happening = No. of times event occurred in the past/Total no. of observations.

A. priori approach

B. one of these answers

C. elative frequency approach

D. ubjective approach

View answer

Correct Answer: C

Question #138

Suppose you were given $4,000 today and deposited it into an account paying 8% per year, compounded monthly. If you know that you will need $5,000 in the account 10 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 10 years?

A. 24

B. 21

C. 23

D. an't be done

E. 11

View answer

Correct Answer: B

Question #139

Curzon Corp reported the following in its Shareholder's Equity account:In calculating a Price to Book value for Curzon, the appropriate book value per common share is closest to:

A. 10

B. 12

C. 13

View answer

Correct Answer: B

Question #140

A firm follows LIFO accounting. Its inventory accounts for a period showed the following sequential accounts:Beginning inventory of 50 units, purchased at $550 units purchased at $1035 units purchased at $925 units sold at $1570 units sold at $12Tax rate = 40%Beginning LIFO reserve = $300Then, the net income of the firm using LIFO is ________.

A. 285

B. 210

C. 198

D. 350

View answer

Correct Answer: B

Question #141

What is the median of 26, 30, 24, 32, 32, 31, 27 and 29?

A. 2

B. 0

C. one of these answers

D. 9

E. 9

View answer

Correct Answer: E

Question #142

How much is in your account in 5 years, if you start with a balance of $1,000 and add $3,500 in 18 months and add an additional $1,000 in 48 months, if the money earns interest at 6% per year, compounded monthly?

A. 5,500

B. 6,514

C. 7,131

D. 6,726

E. 6,892

View answer

Correct Answer: D

Question #143

Under a periodic inventory system, how is COGS determined?

A. nding inventory is counted and subtracted from beginning inventory

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

C. one of these answers is correct

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

View answer

Correct Answer: D

Question #144

When a composite of international portfolios is created, firms should separate portfolios that are allowed to use currency ________ from portfolios that may not use ________, unless the use of currency ________ is considered immaterial. (Same answer for all three spaces)

A. election

B. edging

C. xchanges

D. waps

E. trategy

View answer

Correct Answer: B

Question #145

Performance is the record of the ________.

A. ndividual

B. irm

C. nvestment manager

D. hild

E. erson

View answer

Correct Answer: B

Question #146

Suppose that stock prices are mean reverting over a three to five year period. Which form of the efficientmarket hypothesis does this violate?

A. one

B. eak form only

C. emistrong and weak forms only

View answer

Correct Answer: B

Question #147

The accounting equation reads:

A. evenue minus expenses equals profit

B. ssets equal Liabilities plus Stockholders' Equity

C. ssets plus Liabilities is equal to Stockholders' Equity

D. one of these answers is correct

View answer

Correct Answer: B

Question #148

Which of the following is/are true about an auditor's opinion?

A. f an auditor finds that the firm's financial statements fairly represent the company's financial performance and position, he will issue an unqualified opinion

B. only

C. & III

D. & II

E. II only

View answer

Correct Answer: C

Question #149

A stockbroker placed the following order:50 shares of Kaiser Aluminum preferred at $104 a share100 shares of GTE preferred at $25 1/4 a share20 shares of Boston Edison preferred at $9 1/8 a shareWhat is the weighted mean price per share?

A. 79

B. 25

C. 103

D. one of these answers

E. 42

View answer

Correct Answer: D

Question #150

Which of the following groups are least likely to be creditors of a company?

A. uppliers

B. nvestors

C. anks

D. ustomers

View answer

Correct Answer: D

Question #151

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

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

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

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

D. one of these statements are correct

View answer

Correct Answer: D

Question #152

The annual commissions per salesperson employed by a manufacturer of light machinery averaged $40,000 with a standard deviation of $5,000. What percent of the sales persons earn between $32,000 and $42,000?

A. 0

B. 4

C. 9

D. one of these answers

E. 1

View answer

Correct Answer: A

Question #153

A test to determine whether a convertible security is dilutive or antidilutive is to calculate EPS

A. or the security alone and compare it to the EPS without inclusion of the security

B. or the security alone and compare it to the EPS with inclusion of the security

C. or the security alone

D. ithout inclusion of the security

E. ith inclusion of the security

View answer

Correct Answer: A

Question #154

Jay Simpson was recently convicted of a felony in the state of California. Jay is a resident of Arizona, where he conducts all his business. The felony conviction resulted from activities not related to his primary business. With regard to standard II.B-Professional Misconduct, Jay has:

A. iolated the standard since felony convictions are considered professional misconduct

B. ot violated the standard since the conviction occurred in a non-resident state

C. ot violated the standard since AIMR does not impose sanctions for felony convictions

D. ot violated the standard since the conviction is for non-business activities

E. one of these answers

View answer

Correct Answer: A

Question #155

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

A. one of these answers is correct

B. arliest price

C. verage price

D. ower of cost or market

View answer

Correct Answer: C

Question #156

Past experience of a large manufacturing firm with administering a test to recent college graduates who had applied for a job revealed that the mean test score was 500, and the standard deviation was 50. The distribution of the test scores was normal. Based on this experience, management is considering placing a person whose scores is in the upper 6 percent of the distribution directly into a responsible position. What is the lowest score a college graduate must earn to qualify for a responsible position?

A. one of these answers

B. 60

C. 25

D. 78

E. 0

View answer

Correct Answer: D

Question #157

Melissa Hart, a quantitative analyst with the Kansas City Federal Reserve, has been involved with accumulating data for an essay regarding economic conditions in her area. Specifically, Melissa has been gathering data related to the levels of consumer debt in the state of Missouri. The following is a description of the data:Sample mean: $3,451.00Standard deviation of the sample: $819Number of observations: 441Assume that Ms. Hart formulates a hypothesis test in which the null hypothesis specifies that the p

A. he answer cannot be determined from the information provided

B. 39

C. 1

D. 39

E. 39

View answer

Correct Answer: E

Question #158

In a purely floating exchange rate economy, a shift toward a more expansionary fiscal policy will move the capital account toward a ________. The current account will move toward a ________.

A. urplus, surplus too

B. urplus, deficit

C. eficit, surplus

D. eficit, deficit too

View answer

Correct Answer: B

Question #159

Current liabilities are defined as those that come due:

A. ithin a year

B. he shorter of "within an operating cycle" or "within a year

C. ithin an operating cycle

D. he longer of "within an operating cycle" or "within a year

View answer

Correct Answer: D

Question #160

Which of the following would be reported as an extraordinary item?

A. ninsured loss from a flood

B. ain or loss from passing of a new law

C. ll of these answers are correct

D. ain or loss from early retirement of debt

View answer

Correct Answer: C

Question #161

If you owe 3 debts ($100 due 6 months from now, $500 due 8 months from now, and $1,000 due 11 months from now), what single payment can you make today to settle them, if interest is assessed at 10% per year, compounded monthly?

A. 1,600

B. 1,475

C. 1,552

D. 1,387

E. 1,504

View answer

Correct Answer: B

Question #162

Under the Performance Presentation Standards, asset-weighting of portfolio returns within a composite is required. The ________ of period weightings must be used.

A. eginning

B. nd

C. one of these answers

D. idpoint

View answer

Correct Answer: A

Question #163

Which of the following are considered basic characteristics of a security and must be included in research reports?

A. usiness risk

B. egree of uncertainty

C. nnual expected income

D. ield-to-maturity

E. ll of these answers

View answer

Correct Answer: E

Question #164

Revenues of an entity are usually measured by the exchange values of the assets or liabilities involved.Recognition of revenue does not occur until

A. he entity has substantially accomplished what it is agreed to do

B. he revenue is realizable

C. one of these answers

D. roducts or services are exchanged for cash or claims to cash

E. he revenue is realized and earned

View answer

Correct Answer: E

Question #165

The promulgation of GAAP is a responsibility that rests with:

A. he Securities and Exchange Commission (SEC)

B. he Committee on Accounting Procedures (CAP)

C. one of these answers

D. he American Accounting Association (AAA)

View answer

Correct Answer: A

Question #166

Which of the following is correct about a probability distribution?

A. one of these answers

B. um of the probabilities of all possible outcomes must equal 1

C. robability of each outcome must be between 0 and 1 inclusive

D. utcomes must be mutually exclusive

E. ll of these answers

View answer

Correct Answer: E

Question #167

If you deposit $2,000 today, how much will you have in 3 years, if interest is earned at a rate of 8% per year, compounded annually?

A. 2,519

B. 2,576

C. 2,400

D. 3,121

E. 2,614

View answer

Correct Answer: A

Question #168

A trial generates only two results, "success" and "failure." The variance of the number of failures in 20 trials equals 2.35. The probability of success on a given trial equals ________.

A.

B.

C.

D.

View answer

Correct Answer: B

Question #169

If the critical value for a test statistic equals 2.45, what value of the test statistic would guarantee no chance of making a Type I error?

A. one of these answers

B.

C.

D.

E.

View answer

Correct Answer: C

Question #170

When financial statements are presented that are not in conformity with generally accepted accounting principles, an auditor may express a Qualified Opinion Disclaimer of an OpinionQualified Opinion Disclaimer of an Opinion

A. es NoII

B. I

C. II

D.

E. V

View answer

Correct Answer: C

Question #171

The interest expense on a premium bond _______ over time.

A. ecreases

B. emains constant

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

D. ncreases

View answer

Correct Answer: A

Question #172

GAAP requires that:

A. ash flows from interest related inflows and outflows on debt be considered investing cash flows

B. ash flows from dividend receipts be considered investing cash flows

C. ll of these answers

D. one of these answers

View answer

Correct Answer: D

Question #173

You can enter a derivative contract that will pay $100 at the end of a year if the price of corn exceeds $3 per bushel, or $50 if it is equal to $3 per bushel or lower. The probability that corn will exceed $x by the end of one year is 50%. The current price of the contract is $60, and interest is 5% per year. What is the optimal strategy?

A. ell the derivative contract short if corn prices rise

B. nvest $60 at 5% until the end of the year

C. uy $3 per bushel worth of corn futures

D. nter into the derivative contract for a cost of $60

View answer

Correct Answer: D

Question #174

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

A. IFO

B. IFO

C. one of these answers

D. verage cost

View answer

Correct Answer: B

Question #175

If you deposit $2,250 today into a savings account paying 8% per year, compounded semiannually, how much is in your account in 10 years?

A. 4,587

B. 10,487

C. 3,330

D. 4,857

E. 4,930

View answer

Correct Answer: E

Question #176

Which of the following are mandatory disclosure requirements under AIMR-PPS?

A. he number of portfolios and assets in each composite

B. only

C. and II only

D. , II and III only

E. II and IV only

View answer

Correct Answer: B

Question #177

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

A. ccounts Payable

B. ash

C. erchandise Inventory

D. urchases

View answer

Correct Answer: D

Question #178

The Prudent Man Rule states that the trustee must achieve an equitable balance between current income and the ________ of principal in ________.

A. rudent management; in money markets

B. reservation; real terms

C. teady growth; nominal terms

D. reservation; nominal terms

E. rudent management; in fixed-income securities

View answer

Correct Answer: B

Question #179

Why do the corporation's directors declare stock dividends?

A. o increase the number of shares outstanding

B. ll of these answers are correct

C. o keep the market value of the company's stock affordable

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

View answer

Correct Answer: B

Question #180

Which of the following statements is false regarding confidence levels and/or tests of significance?

A. n most hypothesis testing, the confidence level is equal to 0

B. ll else equal, the confidence interval of a hypothesis test with a 5% level of significance is less than the confidence interval for a hypothesis test with a 1% level of significance

C. n most hypothesis tests, the power of the test is equal to (1 - alpha)

D. ore than one of these answers is incorrect

E. he significance level of a test is equal to (1 - confidence level)

View answer

Correct Answer: D

Question #181

How much must you deposit today if you wish to have $50,000 in 20 years, assuming that interest accumulates at 6% per year, compounded annually?

A. 2,500

B. 160,356

C. 12,299

D. 16,604

E. 15,590

View answer

Correct Answer: E

Question #182

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

A. 2

B. 20

C. 24

D. 24

E. 26

View answer

Correct Answer: C

Question #183

The following data have been extracted from the financial statements of a firm for two years, 1993 and 1994:1993 1994Assets 10,895 12,444Sales 8,465 9,275Inventory 3,126 3,549COGS 7,120 7,387The average inventory processing period for 1994 equals ________.

A. 64

B. 23

C. 14

D. 98

E. nventory turnover ratio = COGS/average inventory

View answer

Correct Answer: A

Question #184

Which of the following best describes a firm's book value of its common stock?

A. he amount of retained earnings of a firm minus any authorized but unissued preferred stock

B. one of these answers

C. ll of these answers

D. he total number of common shares of a firm that are outstanding multiplied by the present price that the firm's stock is selling for

E. he total assets of a firm less liabilities and any claims senior to common stock that is reported on a firm's balance sheet

View answer

Correct Answer: E

Question #185

Which of the following methods does a company use to determine what the balance of the allowance for uncollectible accounts should be?

A. ercent of accounts receivable

B. either of these answers are correct

C. oth of these answers are correct

D. ging

View answer

Correct Answer: C

Question #186

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

A. egulatory and legal circumstances

B. ax considerations

C. nvestor preferences, circumstances and unique needs

D. one of these answers

E. he existence of separate beneficiaries

View answer

Correct Answer: E

Question #187

When prices are falling, which of the following is/are true?

A. IFO results in higher current assets

B. I & III

C. I, III & IV

D. & IV

E. I only

View answer

Correct Answer: A

Question #188

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

A. he PPS are voluntary standards and are not required by AIMR to be adopted by a member or a firm

B. I and III only

C. and III only

D. , II and III

E. II only

View answer

Correct Answer: C

Question #189

Assume the least squares equation is Y' = 10 + 20X. What does the value of 10 in the equation indicate?

A. one of these answers

B. or each unit increased in X, Y increases by 10

C. intercept

D. or each unit increased in Y, X increases by 10

View answer

Correct Answer: C

Question #190

A firm has a net profit margin of 25%. Its total asset turnover equals 1.3 and equity turnover equals 2.1. The firm's ROE and financial leverage equal ________.

A. 8

B. 3

C. 2

D. 9

View answer

Correct Answer: C

Question #191

Armando Delrio, a quantitative analyst with Brown Brothers Brokerage, has been instructed to create a regression analysis comparing the relationship between same store sales figures for a batch of retail stocks and marketing expenses for the same series of stocks. In order to adhere to the traditional seven-step method of hypothesis testing, Armando should begin his analysis by performing which of the following actions? Choose the best answer.

A. ormulating the hypothesis

B. ollecting the data

C. tating the significance level

D. one of these answers is correct

E. dentifying the test statistic

View answer

Correct Answer: A

Question #192

Standard II (B) - Professional Misconduct, states which of the following is a violation?

A. dding inappropriate expenses to expense reports over an extended period, although never criminally convicted

B. sing material prepared by another, in the same form as the original, without acknowledging and identifying the author, publisher or source of such material

C. ll of these answers

D. ntoxication at work, which reflects poorly on the profession, raises questions about competence and affects investment decisions

View answer

Correct Answer: D

Question #193

A useful tool in financial statement analysis is the common-size financial statement. What does this tool enable the financial analyst to do?

A. etermine which companies in the same industry are at approximately the same stage of development

B. valuate financial statements of companies within a given industry of approximately the same value

C. scertain the relative potential of companies of similar size in different industries

D. ompare the mix of assets, liabilities, capital, revenue, and expenses within a given industry without respect to relative size

E. one of these answers

View answer

Correct Answer: D

Question #194

Joan, an investment counselor, states in her firm's written promotional material that she is a CFA candidate. She has indeed enrolled in the program, but failed Level I five years ago, has not taken any exams since and is not enrolled in the next exam. Which of the following statements is correct?

A. oan is in compliance with the correct use of the CFA designation because she states she is a candidate

B. oan is not in compliance with the correct use of the CFA designation

C. one of these answers

D. oan is not in compliance with the correct use of the CFA designation

View answer

Correct Answer: D

Question #195

The larger the critical value on the z-statistic,

A. ll of these answers can happen, depending on the R-square

B. he harder it is to reject the null hypothesis

C. he easier it is to accept the null hypothesis

D. he easier it is to reject the null hypothesis

E. one of these answers

View answer

Correct Answer: B

Question #196

If the hypothesized value of a parameter under the null hypothesis lies outside the confidence interval, the null hypothesis:

A. one of these answers

B. annot be rejected at the corresponding significance level

C. hould be rejected at the corresponding significance level

D. s ill-specified

View answer

Correct Answer: C

Question #197

What single deposit could you make today in order to have $1,000,000 in 30 years, assuming it earns interest at 11% per year, compounded monthly?

A. 403,512

B. 115,024

C. 9,523

D. 43,682

E. 37,441

View answer

Correct Answer: E

Question #198

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

A. he manager's soft-dollar practice should be always maintained confidentially in his or her files

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

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

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

E. one of these answers

View answer

Correct Answer: A

Question #199

Wendy Jones, CFA, is reviewing a current bond holding. The bond's duration is 10 and its convexity is 200. Jones believes that interest rates will fall by 100 basis points. Calculate the bond's percentage price change based on a 100 basis point decline.

A. 8

B. 8

C. 12

View answer

Correct Answer: C

Question #200

Under the accrual basis of accounting, which of the following statements is true?

A. eported net income provides a measure of operating performance

B. only

C. , II and III

D. II only

E. and III

View answer

Correct Answer: D

Question #201

Smith, a research analyst with a brokerage firm, decides to change his recommendation on the common stock of Green company, Inc., from a buy to a sell. He mails this change in investment advice to all the firm's clients on Wednesday. The day after the mailing, a client calls with a buy for 500 shares of Green Company. In this circumstance, Smith should:

A. ccept the order

B. dvise the customer of the change in recommendation before accepting the order

C. ot accept the order because it is contrary to the firm's recommendation

D. ot accept the order until five days have elapsed after the communication of the change in recommendation

View answer

Correct Answer: B

Question #202

A firm's accountant has mistakenly overstated depreciation by 50 and understated accounts receivables by 35. The firm's tax rate is 40%. Then, which of the following is/are true?

A. ncome is understated by 30

B. , II & III

C. I, III & IV

D. & III

E. I & IV

View answer

Correct Answer: C

Question #203

The probability that SUV sales will decline by over 10% by June 1 if gasoline prices increase by 50% by May 1, is called:

A. lagged likelihood

B. n unconditional probability

C. joint probability

D. conditional probability

View answer

Correct Answer: D

Question #204

James Fry, CFA, is evaluating the potential investment merit of Cushing Corporation. Cushing's most recent year's earnings were S5.00 per share, and Cushing paid a dividend of $1.50 per share. Fry forecasts that Cushing will cam $4.70 per share next year. Fry estimates Cushing's future growth rate will be 10%, with a required rate of return of 12%. Based on the information provided, calculate Cushing's leading price to earnings (P/E) ratio. If the required rate of return is increased, indicate whether Cushi

A. he P/E ratio is 15

B. he P/E ratio is 15

C. he P/E ratio is 17

View answer

Correct Answer: C

Question #205

If the money supply is held constant, an increase in nominal GDP leads to ________ in the velocity of money.

A. ll of these answers are possible

B. o change

C. decrease

D. n increase

View answer

Correct Answer: D

Question #206

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

A. evenues are recognized when cash is received

B. only

C. I & III

D. II only

E. ll of these answers are correct

View answer

Correct Answer: A

Question #207

If the underlying theory does not suggest a particular direction for the value of an estimated variable, it is appropriate to use a:

A. right-tailed test

B. left-tailed test

C. two-tailed test

D. ither a right-tailed or left-tailed test

View answer

Correct Answer: C

Question #208

The mosaic theory holds that an analyst:

A. an use material public information or nonmaterial nonpublic information in the analyst's analysis

B. hould distinguish between facts and opinions in research reports

C. hould use all available and relevant information in support of an investment recommendation

D. iolates the Code and Standards if the analyst fails to notify her or his employer of the Code and Standards fails to have knowledge of and comply with applicable laws

View answer

Correct Answer: A

Question #209

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

A.

B.

C.

D.

E. one of these answers

View answer

Correct Answer: A

Question #210

The following information was taken from the accounting records of Boston Corp. for the year ended December 31, 1996 (in $000):Proceeds from issuance of preferred stock F$4,000Dividends paid on preferred stock F400Bonds payable converted to common stock NC2,000Payment for purchase of machinery I500Proceeds from sale of plant building I1,2002% stock dividend on common stock NC300Gain on sale of plant building I200The net cash flows from investing and financing activities that should be presented on Boston's

A. 700 and $3,600

B. 700 and $3,900

C. 700 and $4,000

D. 900 and $3,900

E. 900 and $3,600

View answer

Correct Answer: A

Question #211

Fiscal policy designed to increase aggregate demand during economic downturns and decrease aggregate demand during economic booms is called

A. xpansionary fiscal policy

B. upply-side fiscal policy

C. ew classical fiscal policy

D. ounter-cyclical fiscal policy

View answer

Correct Answer: D

Question #212

Holiday Corp. holds 10,000 shares of its $10 par value common stock as treasury stock reacquired in 1994 for $120,000. On December 12, 1996, Holiday reissued all 10,000 shares for $190,000. Under the cost method of accounting for treasury stock, the reissuance resulted in increasing

A. dditional paid-in capital by $70,000

B. reasury stock by $100,000

C. apital stock by $100,000

D. etained earnings by $70,000

E. ain on sale of investments by $70,000

View answer

Correct Answer: A

Question #213

You borrow $100,000 at a mortgage rate of 8% per year. What's the annual payment you must make to repay the loan in 25 years?

A. 8,349

B. 5,982

C. 9,368

D. 7,493

View answer

Correct Answer: C

Question #214

In a classified balance sheet the following is always true:

A. urrent assets include only items that will be converted into cash within 1 year

B. ssets and liabilities are broken down as current and non-current

C. urrent assets divided by current liabilities will equal working capital

D. ll of these answers are true

View answer

Correct Answer: B

Question #215

An analyst is using the following information to value AGF Company's common shares. AGF paid a dividend of $1.90 per share last year. Dividends are expected to grow at 6% forever. The risk-free rate is 5%, the market risk premium is 7%, and the beta of the common shares is 1.3. The value of the AGF Company's common shares is closest to:

A. 23

B. 24

C. 33

View answer

Correct Answer: B

Question #216

You are examining a group of 5 mutual funds. Their average annual returns have been 10%, 8%, 13%, 19%, and 15%. What is the range of annual returns?

A. 2

B. 0

C. 1

D. 3

View answer

Correct Answer: C

Question #217

Carlos Johanson, a quantitative analyst with Eastern Rhodium Institutional Brokerage, has been instructed to perform a regression analysis to test whether the proliferation of neural networks is positively related to the growth of domestic research grants. Mr. Johanson begins the process by formulating and stating a hypothesis. Now that the hypothesis has been explicitly stated, Mr. Johanson should proceed to which of the following steps? Choose the best answer.

A. pecifying the significance level

B. tating the decision rule

C. ollecting the data and performing the calculations

D. dentifying the appropriate test statistic and probability distribution

E. erforming an autocorrelation test

View answer

Correct Answer: D

Question #218

What monthly payment, beginning next month, would pay off a debt of $1,000 over 15 months, if the interest rate on the debt is 18% per year, compounded monthly?

A. 5

B. 66

C. 74

D. 68

E. 76

View answer

Correct Answer: C

Question #219

You recently purchased a twin-engine plane after landing an ultra-lucrative job on Wall Street. The annual payments on the plane are $8,000 per year and the installment plan extends over 5 years. The payments start today. If your discount rate is 8.5% per year, how much would it have cost you to purchase the plane on an all- cash basis?

A. 34,205

B. 40,611

C. 41,232

D. 36,429

View answer

Correct Answer: A

Question #220

The U.S. Department of Education reported that for the past six years 23, 19, 15, 30, 27 and 25 women received doctorate degrees in computer and information sciences. What is the mean arithmetic annual number of women receiving this degree?

A. 5

B. one of these answers

C. 2

D. 7

E. 3

View answer

Correct Answer: E

Question #221

What annual interest rate, compounded annually, will cause an original deposit of $400 to grow to $725, after 7 years?

A. 1

B.

C.

D.

E.

View answer

Correct Answer: E

Question #222

Jumbotron's accountant has mistakenly understated depreciation by 125 and understated accounts payables by 65. Jumbotron's tax rate is 40%. Which of the following is/are true?

A. ssets are overstated by 125II

B. II only

C. & III

D. one of them

E. I, III & IV

View answer

Correct Answer: B

Question #223

Mr. and Mrs. Jones live in a neighborhood where the mean family income is $45,000 with a standard deviation of $9,000. Mr. and Mrs. Smith live in a neighborhood where the mean is $100,000 and the standard deviation is $30,000. What is the relative dispersion of the family incomes in the two neighborhoods?

A. ones 20%, Smith 30%

B. ones 50%, Smith 33%

C. one of these answers

D. ones 40%, Smith 20%

E. ones 30%, Smith 20%

View answer

Correct Answer: A

Question #224

The probability of getting a value less than 1.3 from a standard normal distribution equals ________.

A.

B.

C.

D.

View answer

Correct Answer: C

Question #225

For an upcoming sight-seeing visit to India, a U.S. resident recently purchased a hundred thousand Indian Rupees. His action

A. reated a credit balance in the U

B. reated a debit balance in the U

C. reated a deficit in the U

D. one of these answers

View answer

Correct Answer: B

Question #226

Identify the most accurate statement regarding collateralized borrowing transactions.

A. epurchase agreements usually offer the lowest interest cost

B. argin buying usually allows for borrowing a higher percentage of the collateral value

C. argin buying is usually the preferred transaction structure for institutional bond investors

View answer

Correct Answer: A

Question #227

Which of the following is not a violation of Standard II (C)?

A. sing a chart that was prepared by another analyst in a presentation, without acknowledgment

B. ll of these answers are violations

C. iving an oral report and citing specific quotations, attributable to "leading analysts," without specific reference

D. se of statistical information provided by Standard & Poor's, without acknowledgment

E. se of a small part of an analyst's work who is employed in a completely different (non-competitive) industry, without acknowledgment

View answer

Correct Answer: D

Question #228

Bartel Corp. has decided to build a new manufacturing facility in a foreign country where production costs will be considerably less than costs at Bartel's aging domestic plant. Bartel expects the increased profits from this off-shore facility will completely pay off the cost of construction within seven years. Bartel hopes to finance the new facility with a single debt issue with the lowest possible coupon rate. The form of borrowing best suited to this project would most likely be:

A. edium-term notes (MTN)

B. ebentures with a negative pledge clause

C. ecured mortgage bonds

View answer

Correct Answer: C

Question #229

The following data pertain to Cosmotron Company's financial state as of Dec 31, 1994:Net Income $400Increase in inventory $120Decrease in accounts receivable $45Increase in payables $165Depreciatio n$100Dividends paid$85Tax rate 30%What was Cosmotron's operating cash flow in 1994?

A. 590

B. 490

C. 675

D. 505

View answer

Correct Answer: A

Question #230

Form 10-K is filed with the SEC to update the information a company supplied when filing a registration statement under the Securities Exchange Act of 1934. Form 10-K is a report that is filed

A. emiannually within 30 days of the end of a company's second and fourth fiscal quarters

B. uarterly within 45 days of the end of each quarter

C. ithin 15 days of the occurrence of significant events

D. one of these answers

E. nnually within 90 days of the end of a company's fiscal year

View answer

Correct Answer: E

Question #231

Chan and Chung are two of the five Managing Directors of Alfalfa, a mid-size hedge fund. In a recent court case involving a securities lawsuit, Chan was called on to testify as an expert on securities research. During his testimony, Chan had to invoke several results from a proprietary research carried out by his staff at Alfalfa. He did so without specifically attributing the results to them. At around the same time, Chung had to meet with a few prospective clients for a business presentation. During this

A. either Chan nor Chung has violated the standard

B. han has not violated the standard while Chung has

C. oth Chan and Chung have violated the standard

D. han has violated the standard while Chung has not

View answer

Correct Answer: D

Question #232

Real estate must be valued through an independent appraisal at least ________ unless client agreements state otherwise.

A. nce every five years

B. nce every year

C. nce every three years

D. nce every two years

View answer

Correct Answer: C

Question #233

Which of the following is/are true about turnover ratios?

A. high receivables turnover ratio might imply overly lax credit policy

B. I only

C. , II & III

D. & II

E. & III

View answer

Correct Answer: A

Question #234

Stockholders' Equity is

A. ll of these answers

B. he financial obligations of the company

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

D. ssets plus liabilities

View answer

Correct Answer: C

Question #235

A 6% U.S. Treasury security maturing 9/30/10 is quoted at a price of 97.625 on July 1. The bond pays interest semiannually on March 31 and September 30. On July 1, the clean price of this bond would be closest to:

A. 976

B. 991

C. 946

View answer

Correct Answer: A

Question #236

If 68% of the observations on a normal distribution fall between -20 and + 60, the mean and the standard deviation of the distribution are:

A. 0,40

B. 0,20

C. 0,40

D. 0,20

View answer

Correct Answer: A

Question #237

What is it called when all the items in the population have the same chance of being selected for the sample?

A. luster sampling

B. imple Random sampling

C. udgment sampling

D. onprobability sampling

E. one of these answers

View answer

Correct Answer: B

Question #238

Within the Keynesian aggregate expenditure model, the central catalyst that leads to changes in output and employment is changes in

A. rices

B. ggregate supply

C. age rates

D. ggregate expenditures

View answer

Correct Answer: D

Question #239

Standard IV (B.5), Preservation of Confidentiality specifically states that one may not enter into ________ that may prevent a party from cooperating with the Professional Conduct Program (PCP) in its investigation of the member's alleged violations of the Code and Standards.

A. ettlement agreements

B. onfidential conversations

C. riority dealings

D. usiness relationships

View answer

Correct Answer: A

Question #240

Peterson Investments has three bond portfolio managers. Manager X invests only in U.S. Treasury STRIPS. Manager Y invests only in putable corporate bonds. Manager Z invests only in mortgage-backed securities guaranteed by GNM

A. Which of the following statements is most likely to be TRUE regarding the risks of each manager's portfolio?

A. anager X has more reinvestment risk than Manager Z

B. anager Z has more volatility risk than Manager X

C. anager Y has more interest rate risk than Manager X

View answer

Correct Answer: B

Question #241

Jack wants to retire a millionaire. If he is 30 years old today and already has $30,000 in the bank, what monthly payment would he need to make beginning one month from today and continuing until he retires on his 65th birthday, if the money will earn 8% per year, compounded monthly?

A. 222

B. 139

C. 503

D. 470

E. 238

View answer

Correct Answer: A

Question #242

Which is true for a binomial distribution?

A. ll of these answers are correct

B. alue of p is equal to 1

C. robability of success remains the same from trial to trial

D. here are three or more possible outcomes

E. one of these answers are correct

View answer

Correct Answer: C

Question #243

A researcher has decided to create a frequency distribution using the following classes:30-45, 45-60, 60-75, 76 & over.The selection of this set involves which of the following?

A. on-overlapping classes

B. II only

C. only

D. & III only

E. I & III only

View answer

Correct Answer: E

Question #244

The first card selected from a standard 52 card deck was a king. If it is returned to the deck, what is the probability that a king will be drawn on the second selection?

A. /4 or 0

B. /13, or 0

C. one of these answers

D. /3 or 0

E. 2/13, or 0

View answer

Correct Answer: B

Question #245

Which of the following is/are true about a normal distribution?

A. t has only one mode

B. II only

C. , II and III

D. I only

E. & IV

View answer

Correct Answer: E

Question #246

The results of the regressions using 200 observation on a variable Y against X are as follows:Coefficient Standard errorintercept 3.62.1slope 8.11.3R square = 49%The regression equation can be expressed as:

A. = 3

B. = 8

C. = 8

D. = 3

View answer

Correct Answer: A

Question #247

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 #248

According to supply-side theory, an increase in marginal tax rates will

A. ll of these answers

B. ncourage individuals to substitute less-desired, tax-deductible goods for more-desired, nondeductible goods

C. ecrease the supply of capital and reduce its productive efficiency

D. ecrease the supply of labor and reduce its productive efficiency

View answer

Correct Answer: A

Question #249

Under the indirect method, cash flow from operating activities is computed by adjusting net income for all of the following, except

A. oncash changes in fixed assets

B. onoperating items included in net income

C. oncash revenues and expenses

D. oncash changes in operating assets

E. oncash changes in operating liabilities

View answer

Correct Answer: A

Question #250

Where is Unearned Revenue reported in the financial statements?

A. iability section of the balance sheet

B. sset section of the balance sheet

C. perating expense section of the income statement

D. evenue section of the income statement

View answer

Correct Answer: A

Question #251

Which of the following will most likely increase aggregate supply in the long run?

A. dvances in technology

B. low rate of capital formation

C. igher real interest rates due to the federal government's large budget deficits

D. nfavorable weather conditions in agricultural areas

E. n increase in the expected inflation rate

View answer

Correct Answer: A

Question #252

Cash outflows for payment of cash dividends is an example of:

A. ash flows from operating activities

B. ash flows from financing activities

C. ash flows from noncash investing and financing activities

D. ash flows from investing activities

View answer

Correct Answer: C

Question #253

Jurgens is a portfolio manager with an investment firm based in New York. One of her firm's clients has told Jurgens that he will compensate her beyond that provided by her firm on the basis of the capital appreciation of his portfolio each year. Jurgens should:

A. urn down the additional compensations because it will result in conflicts with the interest of other client's accounts

B. urn down the additional compensation because it will create undue pressure on her to achieve strong short-term performance

C. btain permission from her employer prior to accepting the compensation arrangement

D. eceive permission from AIMR for the compensation arrangement

View answer

Correct Answer: C

Question #254

Standard IV (B.6) deals with ________.

A. reservation of Confidentiality

B. rohibition against Use of Material Nonpublic Information

C. one of these answers

D. isclosure of Referral Fees

E. riority of Transactions

View answer

Correct Answer: G

Question #255

An economist has forecast that the term structure of interest rates will remain perfectly flat. According to the liquidity preference theory, the economist's forecast implies that future short-term interest rates will:

A. ecrease over time

B. ncrease over time

C. qual current short-term interest rates

View answer

Correct Answer: A

Question #256

Two portfolio managers at an investment management firm are discussing option strategies for their clients' portfolios. The first manager is considering a covered call strategy on Consolidated Steel Inc. (CSI). The manager states that the strategy is attractive since it will increase the expected returns from the anticipated appreciation in CSI, while reducing the downside risk. The second manager is considering a protective put strategy on Millwood Lumber Company (MLC). The manager states that the protecti

A. nly the first manager is incorrect

B. nly the second manager is incorrect

C. oth the first manager and the second manager are incorrect

View answer

Correct Answer: C

Question #257

The average age of a firm's depreciable assets is 9 years. The firm, subject to a tax rate of 40%, saves 20,000 each year due to depreciation expense. The total depreciation that the firm has accumulated is _______.

A. 00,000

B. 80,000

C. 50,000

D. 2,000

View answer

Correct Answer: C

Question #258

Typical features attached to preferred stock include all of the following except:

A. emand redemption rights

B. ividend distribution preferences

C. iquidation priorities

D. on-voting rights

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Correct Answer: A

Question #259

If the government moves the entire tax schedule upward by 5%, the primary effect on the economy will be through:

A. ll of these answers

B. he demand side, wherein disposable income and private demand goes down

C. decrease in the budget deficit due to increase in tax revenues

D. he supply side, wherein the relative attractiveness of productive activity goes down in relation to leisure and tax avoidance activities

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Correct Answer: B

Question #260

Which of the following statements about expected inflation are true?

A. nterest rate volatility will increase

B. rice increases will typically outpace increases in wages

C. ll of these answers are correct

D. enders are not compensated for the loss of purchasing power when funds are repaid

E. one of these answers is correct

View answer

Correct Answer: E

Question #261

Which of the following can be found in Standard II?

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

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

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

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

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

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Correct Answer: B

Question #262

Richard Wallace manages a portfolio of fixed-income securities for a large multinational investment firm. Wallace's portfolio is exposed to reinvestment risk, which he is attempting to reduce by adding securities with low levels of reinvestment risk. Of the following bonds, Wallace should most appropriately choose:

A. mortgage-backed security with scheduled principal and interest payments

B. n 8%, 10-year Treasury bond with semiannual payments

C. 15-year Treasury strip

View answer

Correct Answer: C

Question #263

Smirlee Montero is a fixed income analyst at a small investment firm. She has been studying the subject of "Body Language" in order to gauge the effectiveness of reading into the dispositions of people. Based on her own empirical tests carried out over the past two years involving 64 different subjects, she has concluded that during the meetings with analysts, a senior management official is usually more excited and waves hands quite often when the information like earnings report (which is released a coupl

A. iolated Standard IV (1) - Reasonable Basis and Representations by using a non-conventional and controversial technique

B. iolated Standard IV (A

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

D. as not violated any Standards

View answer

Correct Answer: D

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