Updated CFA Level III Exam Dumps – Your Path to Success

Question #1

Distributions X and Y have the same coefficients of variation. If the mean of X is twice the mean of Y and the standard deviation of X is 5, the standard deviation of Y is ________.

A.

B. 0

C.

D.

View answer

Correct Answer: C

Question #2

Given the academic research supporting the efficiency of the stock market, which of the following is the least accurate description of a portfolio manager's role in an efficient market?

A. dentifying and specifying a client's objectives and constraints

B. pecifying an explicit investment strategy to meet the client's needs

C. iversifying the client's portfolio across all asset classes to eliminate systematic risk

View answer

Correct Answer: C

Question #3

The crowding-out effect refers to the possibility that an

A. ncrease in consumption spending will crowd out government spending

B. ncrease in private savings will crowd out the taxable income of households

C. ncrease in the money supply will result in a decline in taxes

D. ncrease in the federal deficit will result in higher interest rates, which will crowd out private investment and consumption

View answer

Correct Answer: D

Question #4

Currency overlay portfolios must be valued at least ________.

A. onthly

B. early

C. uarterly

D. ourly

E. aily

View answer

Correct Answer: C

Question #5

Which accounting principle is consistent with reporting financial results that can be compared with previous periods?

A. atching

B. dequate disclosure

C. ateriality

D. onsistency

View answer

Correct Answer: D

Question #6

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

A. 347,000

B. 357,000

C. 243,000

D. 340,000

E. 352,000

View answer

Correct Answer: A

Question #7

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 18,583The firm's gross profit margin equals ________.

A.

B.

C.

D.

View answer

Correct Answer: D

Question #8

A statistician has framed his hypothesis testing problem as:Ho: mean >= 1 H1: mean < 1For the given sample, he calculates the z-statistic. Then, the region of rejection at the 95% level is given by:

A. -statistic > +1

B. -statistic < -1

C. 1

D. -statistic < -1

View answer

Correct Answer: B

Question #9

Which of the following can be found in Standard III?

A. embers shall not misrepresent investment performance

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

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

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

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

View answer

Correct Answer: D

Question #10

A large silver mining corporation in Australia is expecting to have three large inflows of raw silver resulting from a discovery of three silver seams that were previously undetectable. The firm expects the first silver inflow to be ready for sale in nine months, followed by the second inflow three months later and the final inflow six months later. The mining company is expecting the price of silver to begin a downward trend for the next 18 monthsand wants to hedge the expected inflows without exposing the

A. eries of futures contracts expiring in 9, 12, and 15 months

B. eries of forward contracts expiring in 9, 12, and 15 months

C. wap contract with payments in 9, 12, and 15 months

View answer

Correct Answer: A

Question #11

The procedures for compliance with Standard IV (B.8), Disclosure of Referral Fees, recommend that you disclose all referral agreements ________.

A. t least orally

B. ny of these answers

C. rally or in writing

D. n writing

View answer

Correct Answer: D

Question #12

Congress passes a law requiring the government to pay certain debts of companies that have declared bankruptcy. Which of the following terms most accurately describes this program?

A. upply-side

B. utomatic stabilizer

C. xpansionary fiscal policy

D. oral hazard

E. one of these answers is correct

View answer

Correct Answer: B

Question #13

The purpose of the Management Report is to:

A. nalyze favorable and unfavorable trends affecting the firm

B. , II & III

C. I & III

D. I, III & IV

E. I & IV

View answer

Correct Answer: D

Question #14

An EPS amount is always shown for:

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

B. ncome from continuous operations

C. umulative effect of accounting changes

D. ll of these answers are correct

View answer

Correct Answer: D

Question #15

"Restricted Periods" are discussed in Standard IV (B.4), Priority of Transactions. Another name for restricted periods is ________ periods.

A. lackout

B. estrained

C. one of these answers

D. aptive

View answer

Correct Answer: A

Question #16

If the Fed conducts a demand stimulus policy, the rational expectations theory implies that

A. he slope of the Phillips curve will increase

B. nemployment will temporarily fall below the natural rate

C. he Phillips curve immediately shifts upward

D. he natural unemployment will rise

View answer

Correct Answer: C

Question #17

Gamma-Theta is a financial software firm with gross sales of 176,000 last year. Its cost of goods sold equaled 25,685. Gamma-Theta's corporate tax rate is 35%. If its net income after taxes was 70,279, its operating expenses were ________.

A. 1,889

B. 2,193

C. 9,495

D. 1,722

View answer

Correct Answer: B

Question #18

Employment is the number of persons employed divided by the number of persons

A. n the civilian population age 16 and over

B. mployed plus the number unemployed

C. nemployed

D. n the labor force

View answer

Correct Answer: A

Question #19

________ accounting is suggested for calculating performance.

A. rade-date

B. erformance

C. ccrual

D. ongitudinal

E. omposite

View answer

Correct Answer: A

Question #20

The coefficient of variation (CV) for a set of annual incomes is 18%; the coefficient of variation for the length of service with the company is 29%. What does this indicate?

A. ore dispersion in the distribution of the incomes compared with the dispersion of their length of service

B. ispersions are equal

C. ispersions in the two distributions (income and service) cannot be compared using percents

D. one of these answers

E. ore dispersion in the lengths of service compared with incomes

View answer

Correct Answer: E

Question #21

Which of the following best describes the relationship between the velocity of money and the demand for money?

A. hen the demand for money increases, the velocity of money increases

B. he demand for money is not related to the velocity of money

C. he demand for money must be stable for the velocity of money to increase

D. hen the demand for money declines, the velocity of money increases

View answer

Correct Answer: D

Question #22

In 1994, Butler Inc. issued $10 par value common stock for $25 per share. No other common stock transactions occurred until March 31, 1996, when Butler acquired some of the issued shares for $20 per shareand retired them. Which of the following statements correctly states an effect of this acquisition and retirement?

A. etained earnings is increased

B. dditional paid-in capital is decreased

C. dditional paid-in capital is increased

D. 996 net income is increased

E. 996 net income is decreased

View answer

Correct Answer: B

Question #23

You have just received a sales brochure from a reputable investment firm which describes a financial investment vehicle which pays $300 at the end of year 1, $500 at the end of year 2 and $100 at the end of year3. If you are looking for an annual return of 6%, what's the maximum amount you should be willing to purchase this investment certificate for?

A. 797

B. 827

C. 900

D. 812

View answer

Correct Answer: D

Question #24

The price for French francs is $0.1945-67. What is the percent spread for this currency?

A.

B.

C. 1

D.

E. 1

View answer

Correct Answer: B

Question #25

Which of the following statements regarding hypothesis testing is false?

A. he F-statistic is used in multivariate quantitative analysis

B. ore than one of these answers is incorrect

C. f the null hypothesis is rejected, then it is said the result is "not statistically significant

D. f the population standard deviation is unknown, then the standard error of the estimate is found by dividing the sample standard deviation by the square root of "n

E. he power of a test is usually equal to (1 - the probability of a Type II error)

View answer

Correct Answer: C

Question #26

Marine Corp. uses the direct method to prepare its statement of cash flows. Marine's trial balance at December 31, 1996 and 1995 are as follows:Dec. 31, 1996 Dec. 31, 1995Debits:Cash $35,000 $32,000Accounts receivable 33,000 30,000Inventory 31,000 47,000Property, plant & equipment1 00,000 95,000Unamortized bond discount 4,500 5,000Cost of goods sold250,000 380,000Selling expenses 141,500172,000General and administrative expenses 137,000 151,300Interest expense 4,300 2,600Income tax expense 20,400 61,200Tota

A. 1,700

B. 3,800

C. 3,600

D. 4,300

E. 4,800

View answer

Correct Answer: B

Question #27

Retained earnings represent:

A. one of these answers

B. ndistributed net income in the last accounting period

C. ccumulated, undistributed earnings since inception

D. arnings inclusive of any paid-in capital since inception

View answer

Correct Answer: C

Question #28

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

A. nvestable funds

B. ime horizon

C. isk tolerance

D. roxy voting

E. iquidity needs

View answer

Correct Answer: C

Question #29

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

A. verage price

B. one of these answers

C. ower of cost or market

D. arliest price

View answer

Correct Answer: A

Question #30

A firm currently has a negative working capital. Which of the following is true?

A. he firm is close to bankruptcy

B. he firm's accounting profits are low

C. he firm's current ratio is less than 1

D. he firm has a high debt-to-asset ratio

View answer

Correct Answer: C

Question #31

A(n) ________ in a nation's currency in the foreign exchange market compensates for the nation's high ________ rate.

A. epreciation; exchange

B. ppreciation; exchange

C. epreciation; inflation

D. ppreciation; inflation

E. one of these answers

View answer

Correct Answer: C

Question #32

Convertible and other hybrid securities

A. re never included in composites with conventional securities

B. re managed separately and treatment must be disclosed in performance reporting

C. re not assets to which the Standards are applicable

D. ust be treated consistently across and within composites

View answer

Correct Answer: D

Question #33

Under Standard III (E) - Responsibilities of Supervisors - which of the following are NOT employees that are covered under this standard?

A. evel I CFA candidates

B. FA charterholders

C. one of these answers

D. on AIMR members

E. FA candidates

View answer

Correct Answer: D

Question #34

What is the effective date for compliance with the AIMR-PPS for U.S. and Canadian investments?

A. anuary 1, 1995

B. anuary 1, 1992

C. anuary 1, 1993

D. anuary 1, 1994

View answer

Correct Answer: C

Question #35

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

A. ower of cost or market (LCM)

B. IFO

C. IFO

D. eighted average cost

View answer

Correct Answer: D

Question #36

The 8% McClintock bonds maturing in 10 years are currently trading at 97.55. These bonds are option-free and pay coupons semiannually. Which of the following statements is most likely to be TRUE?

A. he yield to maturity is greater than 8

B. he current yield is less than 8

C. he nominal yield is greater than 8

View answer

Correct Answer: A

Question #37

The __________ is the most conservative of the following liquidity ratios.

A. urrent ratio

B. uick ratio

C. ash ratio

D. iquid ratio

View answer

Correct Answer: C

Question #38

Which of the following items that are reported on an income statement will directly affect the retained earnings from one accounting period to another?

A. he sale of new common stock

B. he payment of cash dividends

C. he purchase of new equipment with the proceeds of a loan

D. one of these answers

E. ccounts payable

View answer

Correct Answer: B

Question #39

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

A. ype I error; decrease

B. ype I error; increase

C. ype II error; decrease

D. ype I error; remain unchanged

E. ype II error; remain unchanged

View answer

Correct Answer: A

Question #40

The weights of a sample of crates ready for shipment to Laos are (in kilograms): 103, 97, 101, 106 and 103.What is the mean deviation?

A.

B. 02

C. kg

D. one of these answers

E.

View answer

Correct Answer: A

Question #41

A statistician has framed his hypothesis testing problem as:Ho: mean = 100 H1: mean < 100Specify the region for the p-statistic which will lead to the rejection of the null at the 80% significance level.

A. -statistic < -0

B. -statistic > +1

C. -statistic < -1

D. -statistic < -1

View answer

Correct Answer: A

Question #42

Firms with records or performance calculations for periods prior to the effective dates for AIMR-PPS compliance can still claim compliance with the PPS using which of the following methods?

A. estate all of its performance numbers in accordance with the standards

B. , II and III

C. only

D. and II only

E. and III only

View answer

Correct Answer: A

Question #43

Janice Grass, CFA, created a gourmet baby food line. To get the production lines up and running, she must borrow $12 million. Grass is concerned that the US Federal Reserve (Fed) will raise interest rates dramatically, so she enters into a 2 x 8 FRA agreement. The FRA is quoted at 6%. LIBOR interest rates on the expiration day of the FRA are presented in the table below.Based on the table, calculate the payoff on Grass' transaction.

A.

B. $2,630

C. $2,956

View answer

Correct Answer: A

Question #44

The primary beneficiaries of the AIMR-PPS are:

A. urrent & prospective clients

B. IMR members

C. ll investment professionals

D. nvestment firms who adopt the standards

View answer

Correct Answer: A

Question #45

Which of the following would not be reported as an extraordinary item?

A. ain or loss on sale of fixed assets

B. ain or loss from passing of a new law

C. ain or loss from early retirement of debt

D. ninsured loss from a flood

View answer

Correct Answer: A

Question #46

The par value of a common stock represents

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

B. one of these answers

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

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

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

View answer

Correct Answer: C

Question #47

What is the Net Present Value of this series of annual cash flows at an interest rate of 20% per year: Year 0:<$15,000>, Year 1: $2,000, Year 2: $0, Year 3: $15,000, Year 4 $0, Year 5 $18,000? (Note that the <> are used to indicate a negative number).

A. 2,947

B. 2,581

C. $77

D. 2,442

E. 2,414

View answer

Correct Answer: B

Question #48

According to Chebyshev's Theorem, what percent of the observations lie within plus and minus 1.75 standard deviations of the mean?

A. annot compute because it depends on the shape of the distribution

B. 6%

C. 5%

D. 7%

E. one of these answers

View answer

Correct Answer: D

Question #49

Holding income constant, if consumers and investors decide to spend more on goods and services, then

A. dditional spending will require increased borrowing (or less saving), which will drive up the real rate of interest

B. roducers will expand output without increasing prices to accommodate the stronger demand

C. dditional spending will increase the supply of loanable funds, which will reduce the real interest rate and thereby trigger additional spending

D. he economy's long-run capacity (LRAS) will expand to accommodate the stronger demand

View answer

Correct Answer: A

Question #50

In a management trainee program, 80 percent of the trainees are female, 20 percent male. Ninety percent of the females attended college, 78 percent of the males attended college. A management trainee is selected at random. What is the probability that the person selected is a female who did not attend college?

A.

B.

C.

D.

E. one of these answers

View answer

Correct Answer: D

Question #51

The following stock market return data were observed last year:Returns# of stocksless than -5% 129between -5% and 0% 301between 0% and 10% 636between 10% and 20% 274more than 20% 173The probability that a randomly selected stock had either a negative return or a return more than 20% equals ________.

A.

B.

C.

D.

View answer

Correct Answer: D

Question #52

What would the bid-ask spread be for pound sterling quoted at $14419-28?

A.

B.

C.

D.

E.

View answer

Correct Answer: D

Question #53

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

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

B. iolated Standard IV (3) - Fair Dealing

C. iolated Standard IV (B

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

View answer

Correct Answer: A

Question #54

Why should the analyst place special emphasis in their assessment of cash balances?

A. ash represents the point in a firm's operating cycle where management has maximum discretion with the deployment and use of its resources

B. ash is a company's most liquid asset

C. ll of these answers

D. ash is typically the only asset that is available to meet a firm's financial obligations

E. one of these answers

View answer

Correct Answer: C

Question #55

Which of the following is true?

A. f the geometric return is zero, the arithmetic return must be negative

B. ll of these answers are false

C. f the annual returns have zero volatility, the geometric return is equal to the arithmetic return

D. he geometric return is always less than the arithmetic return

View answer

Correct Answer: C

Question #56

A firm issued 2 million warrants with an exercise price of 102 on June 15, 1996. The maximum price of the stock in 1996 was 129, the average price was 110. The stock closed out the year at 99. How many additional shares must be used in the computation of Diluted EPS as a result of these warrants?

A. 11,782

B. 45,454

C. 8,788

D. ero

View answer

Correct Answer: C

Question #57

If every one of your research reports had a statement stating that every research report on issues by a corporate client reflects the unbiased opinion of the analyst, you would be complying with Standard ________.

A. V (3)

B. V (A

C. V (A

D. I (A)

E. I (C)

View answer

Correct Answer: A

Question #58

The value of an existing single-family home used for residential purposes will most likely be calculated using the:

A. ost approach

B. ncome approach

C. ales comparison approach

View answer

Correct Answer: C

Question #59

The cash flow statement provides more objective information about all of the following, except

A. rends in cash flow components

B. anagement decisions regarding financial policy, dividend policy, and investment for growth

C. firm's ability to generate cash flows from operations

D. ash consequences of investing and financing decisions

E. he amount a firm can be leveraged

View answer

Correct Answer: E

Question #60

In a common-size balance-sheet statement, a firm's current assets are reported at 37% and the long- term liabilities are at 12%. The equity is shown to be 64%. The firm's current ratio equals ________.

A.

B.

C.

D.

View answer

Correct Answer: B

Question #61

Which of the following can be found in Standard IV?

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

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

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

View answer

Correct Answer: B

Question #62

Which economic model supports the theory that budget deficits cause inflation?

A. he supply-side model

B. he crowding-out model

C. one of these models support the theory

D. he new classical model

E. he Keynesian model

View answer

Correct Answer: B

Question #63

How much would you have in a savings account 12 months from now if you start with a balance of $3,000 today, make a deposit of $1,000 in 6 months and make another deposit 6 months after that of $500? Assume that interest accrues at 6% per year, compounded monthly.

A. 4,684

B. 4,777

C. 4,715

D. 4,500

E. 2,500

View answer

Correct Answer: C

Question #64

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

A. ividends paid $25,000

B. ale of land $64,000

C. nventory purchases $29,000

D. urchase of a warehouse $208,000

E. onds issued $90,000

View answer

Correct Answer: C

Question #65

Which of the following is/are FALSE?

A. ver the life of the firm, income and cash flow are the same

B. I only

C. , III & IV

D. II & IV

E. , II, III & IV

View answer

Correct Answer: A

Question #66

Deferred credits arise because of:

A. n over-estimation of assets or earnings, which must now be reversed

B. one of these answers

C. he concept of accrual accounting

D. he use of cash accounting

View answer

Correct Answer: C

Question #67

Which of the following is/are true about available-for-sale securities?

A. hey are current assets

B. & II

C. I only

D. I & III

E. , II & III

View answer

Correct Answer: D

Question #68

A call option on Hartco stock with an exercise price of S50 and an expiration date one year from now is worth $4.00 today. A put option on Hartco stock with an exercise price of $50 and an expiration date one year from now is worth $2.25 today. U.S. Treasury notes maturing in one year are yielding 2.0%. Hartco does not pay a dividend. The value of Hartco*s stock is closest to:

A. 43 per share

B. 47 per share

C. 51 per share

View answer

Correct Answer: C

Question #69

John Cochrun is a reputed money manager who is also an AIMR member. John recently discovered that some employees at the firm where he is employed have been engaging in some questionable activity which could very well be construed as insider trading by the SEC. John, however, does not think the activity is egregious enough to be reported to the SEC. In any case, he does not want to be known as "the rat who blew the whistle." By not reporting the criminal activity, John has:

A. as not violated the AIMR code

B. iolated the AIMR code, Standard I (B) - Fundamental Responsibilities

C. iolated the AIMR code, Standard III (C) - Disclosure of Conflicts to the Employer

D. iolated the AIMR code, Standard III (B) - Duty to the Employer

View answer

Correct Answer: A

Question #70

In preparing its cash flow statement for the year ended December 31, 1998, Roman Co. collected the following data:Gain on sale of equipment $6,000Proceeds from sale of equipment 10,000Purchase of

A.

A. 194,000

B. 188,000

C. 170,000

D. 174,000

E. 176,000

View answer

Correct Answer: C

Question #71

Level I verification requires independent attestation that the requirements of the AIMR-PPS have been met on a (n) ________ basis.

A. nternational

B. ationwide

C. irmwide

D. ttainable

View answer

Correct Answer: C

Question #72

Standard IV (A) is known as ________.

A. nteractions with Clients and Prospects

B. reservation of Confidentiality

C. rofessional Misconduct

D. rohibition against Use of Material Nonpublic Information

E. uty to Employer

View answer

Correct Answer: H

Question #73

The period between the trough of the business cycle and the next peak is called the

A. yclic phase

B. xpansionary phase

C. ontractionary phase

D. ecessionary phase

View answer

Correct Answer: B

Question #74

You are examining a portfolio composed of 33% money-market investments, 9.5% bonds, and 57.5% 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 contribution of stocks toward the portfolio weighted average return?

A. 57

B. 11

C. 4

D. 6

View answer

Correct Answer: D

Question #75

Two firms, Groening Inc. and Shearer Co., have just completed simultaneous bond issuances. Both issues have a stated coupon rate of 5%, pay interest semiannually, and have a face value of $i,000 per bond. The Groening and Shearer issues both have a maturity of 15 years and their duration is approximately the same. If the Groening bond have a higher convexity measure than the Shearer bonds, which issuance will sell for the higher price?

A. roening, since the bonds will depreciate less in a period of rising interest rates

B. roening, since the bonds will depreciate less in a period of falling interest rates

C. hearer, since the bonds will depreciate less in a period of rising interest rates

View answer

Correct Answer: A

Question #76

A firm had retained earnings of $100,000 at the beginning of the year. During the year, the firm had a net income of $55,000 and paid dividends worth $20,000. Then, the change in the firm's retained earnings equals ________.

A. 155,000

B. 35,000

C. 55,000

D. 135,000

View answer

Correct Answer: B

Question #77

Which of the following is correct?

A. ithout tariff protection the number of jobs available to domestic workers would decline

B. ess than 5 percent of world output is sold in a country different from the one in which it is produced

C. xports represent about 30 percent of U

D. egarding international trade, if one country gains, another country must lose

E. he volume of international trade has grown rapidly in recent decades

View answer

Correct Answer: E

Question #78

A firm has a net income of 150, an increase in accounts receivables of 30, depreciation of 55 and a decrease in accounts payable of 25. Its operating cash flow is ________.

A. 00

B. 50

C. 5

D. 10

View answer

Correct Answer: B

Question #79

Why are certain costs of doing business capitalized when incurred and then depreciated or amortized over subsequent accounting periods.

A. o reduce the federal income tax liability

B. o adhere to the concept of conservatism

C. o aid management in the decision-making process

D. o match the costs of production with the revenues as earned

E. o maximize accounting income

View answer

Correct Answer: D

Question #80

You are reviewing a list of 8 recommended securities and wish to invest in 4. You will put 40% of your capital in one, 30% in another, 20% in the third, and 10% in the last one. How many different ways can you choose among the 8 securities and invest according to your design?

A. ,980

B. ,680

C. ,774

D. ,860

View answer

Correct Answer: B

Question #81

Which of the following statements about directors of a company is true?

A. irectors only get paid if the company increases its profitability that year

B. ll directors of a company are senior managers in that company

C. irectors are shareholders' representatives

D. irectors are elected by management of a company

View answer

Correct Answer: C

Question #82

According to the Keynesian model, if the marginal propensity to consume were 0.80, an independent increase in investment expenditures of $20 billion would cause the equilibrium aggregate nominal income to rise

A. 80 billion

B. 16 billion

C. 100 billion

D. 20 billion

E. 50 billion

View answer

Correct Answer: C

Question #83

Standard III (E) is ________.

A. bligation to Inform Employer of Code and Standards

B. uty to Employer

C. esponsibilities of Supervisors

D. isclosure of Conflicts to Employer

E. one of these answers

View answer

Correct Answer: C

Question #84

In a given period, the firm's beginning gross investment is 6,000 and ending gross investment is 10,000. The accumulated depreciation at the beginning was 500 and the ending balance in this account was 1,500. The firm uses straight-line depreciation. Then, the average depreciable life of the firm's assets is ________.

A.

B. years

C. 0 years

D. 2 years

View answer

Correct Answer: C

Question #85

Harold Stone, CFA, is an analyst for Spartacus Venture Capital. Stone is considering investing $3 million in a project with a potential $150 million return over a ten year life. The current risk-free rate is 5%, the equity risk premium is 5%, and the project's beta is 2.0. Stone believes that the project has a 22% probability of failure in the first four years and 13% thereafter. The expected net present value of the project is closest to:

A. I million

B. 2 million

C. 3 million

View answer

Correct Answer: C

Question #86

Andrea Anastasio heads the research wing at HiLo Funds, Ltd., an investment advisory and money management firm. Andrea was recently informed by one of her junior analysts, Marcus Cambus, that the investment recommendation on HotPots food chain stock needed an immediate downgrade from hold to sell. This was based on talks with HotPots' management whom revealed that HotPots would be launching an ill- advised expansion plan soon (this information has been discussed in the financial newspapers, too). Andrea che

A. ndrea has not violated any AIMR code but Cotler has violated Standard III (B) - Duty to Employer

B. II and IV only

C. I and IV only

D. only

E. I, III and IV only

View answer

Correct Answer: B

Question #87

Which of the following would have an effect on cash flow from operations?

A. ale of machinery for $50,000 with a net book value of $35,000

B. , II and III

C. , III and IV

D. II and IV

E. and III

View answer

Correct Answer: C

Question #88

There are 10 rolls of film in a box and 3 are defective. Two rolls are to be selected, one after the other. What is the probability of selecting a defective roll followed by another defective roll?

A. /120, or about 0

B. /15, or about 0

C. one of these answers

D. /4, or 0

E. /2, or 0

View answer

Correct Answer: B

Question #89

Which of the following is not a theoretical basis for the allocation of expenses?

A. rofit maximization

B. ystematic allocation

C. one of these answers

D. ause and effect

E. mmediate recognition

View answer

Correct Answer: A

Question #90

Costs that can be reasonably associated with specific revenues but not with specific products should be

A. apitalized and then amortized over a period not to exceed 60 months

B. xpensed in the period in which the related revenue is recognized

C. apitalized and then amortized over a period not to exceed 40 years

D. llocated to specific products based on the best estimate of the production processing time

E. harged to expense in the period incurred

View answer

Correct Answer: B

Question #91

In the aggregate demand/aggregate supply model, an increase in a country's sustainable potential output is represented by an increase in

A. ctual unemployment

B. rices

C. ggregate demand

D. ong-run aggregate supply

View answer

Correct Answer: D

Question #92

The formula for calculating profit margin is

A. otal sales divided by total expenses

B. et sales minus total expenses divided by net income

C. et income divided by net sales

D. one of these answers is correct

View answer

Correct Answer: C

Question #93

A bond dealer determines that the present value of a particular Treasury note based on Treasury spot rates is greater than its market price. The dealer can generate an arbitrage profit (assuming no transactions costs) by:

A. uying the Treasury note and selling its cash flows as Treasury STRIPS

B. uying the equivalent Treasury STRIPS and selling them as a Treasury note

C. uying the undervalued note and selling short the Treasury security with the nearest maturity

View answer

Correct Answer: A

Question #94

Jeff Stone, CFA, is evaluating a newly issued mortgage backed security for his bond portfolio. Stone expects interest rates to rise gradually over the next few years. If Stone's interest rate forecast is correct, prepayment risk of the mortgage backed security:

A. ill fall to zero, as borrowers will have no incentive to prepay their loans

B. ill increase, as curtailments become more likely

C. ill decrease, although prepayments will still occur

View answer

Correct Answer: C

Question #95

A defined contribution pension plan:

A. isburses benefits based on the returns on the fund's investments

B. one of these answers

C. romises to pay retirees a specific income stream

D. ays defined benefits for a certain period after retirement

View answer

Correct Answer: A

Question #96

Standard III (A) is ________.

A. uty to Employer

B. isclosure of Conflicts to Employer

C. bligation to Inform Employer of Code and Standards

D. isclosure of Additional Compensation Arrangements

E. one of these answers

View answer

Correct Answer: C

Question #97

If the Fed introduces an expansionary monetary policy:

A. eal interest rates fall

B. I & III

C. , II & III

D. & II

E. & III

View answer

Correct Answer: D

Question #98

A long-term asset currently has a book value of $45,000 and a salvage value of $5,000. It was acquired 3 years ago at a cost of $75,000. If the firm uses straight-line depreciation, how many years is the asset expected to be in service?

A. years

B. years

C. years

D. years

View answer

Correct Answer: B

Question #99

Standard III (D) deals with ________.

A. rofessional Misconduct

B. se of Professional Designation

C. lagiarism

D. undamental Responsibilities

E. one of these answers

View answer

Correct Answer: E

Question #100

Three banks have quoted interest rates as follows:Bank A: 10% per year, compounded quarterly.Bank B: 11% per year, compounded annually.Bank C: 10.5% per year, compounded semi-annually.Which bank should you choose to invest with for a period of one year and what's the effective annual rate?

A. ank B, 11%

B. ank A, 10

C. ank C, 12

D. ank A, 11

View answer

Correct Answer: A

Question #101

________ utilize forward contracts to safeguard the value (in home currency terms) of assets denominated in a foreign currency on its balance sheet.

A. ll of these answers

B. rbitrageurs

C. raders

D. edgers

E. peculators

View answer

Correct Answer: D

Question #102

An analyst stated that the purpose of a collateralized mortgage obligation is to redistribute prepayment risk among investors with different risk tolerances while at the same time reducing total prepayment risk for all tranches in the structure. The analyst's statement is correct:

A. nly with respect to redistribution of risk

B. nly with respect to reducing total prepayment risk

C. ith respect to both redistribution of risk and reducing total prepayment risk

View answer

Correct Answer: A

Question #103

A country cannot maintain currency convertibility if:

A. one of these answers

B. t allows the exchange rate value of its currency to fluctuate and follows an independent monetary policy

C. t fixes the exchange rate value of its currency and has a dependent monetary policy

D. t fixes the exchange rate value of its currency and follows an independent monetary policy

View answer

Correct Answer: D

Question #104

Which of the following is/are true about Goodwill?

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

B. & II

C. I only

D. , II & III

E. & III

View answer

Correct Answer: D

Question #105

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

A. 147,000

B. ot enough information

C. 169,000

D. 122,000

E. 140,000

View answer

Correct Answer: B

Question #106

Which of the following would not be included as an asset on a corporate balance sheet?

A. nventory

B. arketable securities

C. uildings

D. ccounts receivable

E. ommon stock

View answer

Correct Answer: E

Question #107

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

A. lop of the line

B. alue of Y when X=0

C. one of these answers

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

E. intercept

View answer

Correct Answer: D

Question #108

The sum of the squares of 65 observations equals 862. The sum of the observations equals 93. The samplestandard deviation of the observations equals ________.

A. 1

B.

C.

D.

View answer

Correct Answer: C

Question #109

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 #110

Which of the following conditions would allow a firm to classify a short-term liability as a long-term debt?

A. he firm has issued a long-term note with the stated purpose of extinguishing the short-term debt when it matures

B. II only

C. & III

D. I only

E. I & III

View answer

Correct Answer: C

Question #111

When comparing the riskiness of investments with different expected returns, one must use ________.

A. one of these answers

B. kewness

C. he coefficient of variation

D. he standard deviation

E. urtosis

View answer

Correct Answer: C

Question #112

Which of the following statements regarding the coefficient of correlation is true?

A. t ranges from -1

B. value of 0

C. one of these answers

D. ll of these answers

E. t measures the strength of the relationship between two variables

View answer

Correct Answer: D

Question #113

In a binomial probability distribution,

A. here are 2 distinct modes

B. he probability graph is bell-shaped and symmetrical

C. ach trial can only take values between 0 and 1

D. ach trial can take only two values

View answer

Correct Answer: D

Question #114

If a distribution is right skewed, which of the following is/are true?

A. t cannot be normally distributed

B. only

C. & IV

D. I only

E. & III

View answer

Correct Answer: B

Question #115

Discrepancies between the changes in accounts reported on the balance sheet and those reported in the cash flow statement are due to

A. nvestment in majority interests

B. oreign exchange translations

C. nfunded pension liabilities

D. rior period adjustments and accounting rule changes

E. cquisitions and divestitures, and foreign subsidiaries

View answer

Correct Answer: E

Question #116

Rob Pirate is considering investing in a subordinated tranche in a collateralized mortgage obligation (CMO). If Pirate wishes to measure his interest rate risk for this debt security, which measure would be most appropriate!

A. odified duration

B. ffective duration

C. ffective convexity

View answer

Correct Answer: B

Question #117

A statistician is working with the following dataset:129, 162, 159, 192, 142, 195, 203, 177, 138, 187, 149, 123, 146, 169, 162, 191, 155, 146, 176, 182, 174, 190, 168.The relative frequency in the frequency class 150-175 equals ________.

A.

B.

C.

D.

View answer

Correct Answer: A

Question #118

An accelerated life test on a large number of type-D alkaline batteries revealed that the mean life for a particular use before they failed is 19.0 hours. The distribution of the lives approximated a normal distribution. The standard deviation of the distribution was 1.2 hours. About 95.44 percent of the batteries failed between what two values?

A. 6

B. 4

C. 2

D. one of these answers

E.

View answer

Correct Answer: A

Question #119

What does the coefficient of determination equal if r = 0.89?

A.

B. one of these answers

C.

D.

E.

View answer

Correct Answer: E

Question #120

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

A. ith stock splits and stock dividends, previously reported EPS numbers are retroactively readjusted

B. I & III

C. , II & III

D. & III

E. only

View answer

Correct Answer: B

Question #121

All of the following are attributes of depreciation except

A. epreciation stays on the balance sheet as long as the asset is owned by the corporation

B. epreciation provides funds for replacement of an asset

C. epreciation is allocation of the cost of an asset over its useful life

D. he purpose of depreciation is to charge against operations, by means of allocation, the cost of an asset

View answer

Correct Answer: B

Question #122

KCE stock is currently selling for $51.13 per share in the market. Six-month American put options on KCE with a strike price of $55 are available, and the risk-free rate of interest is 3.66%. Calculate the lower bound for the KCE American put options.

A. 2

B. 3

C. 3

View answer

Correct Answer: C

Question #123

Which of the following is/are TRUE under GAAP?

A. he change in the assets of a firm net of the change in liabilities represents a change in the total equity of the firm

B. & II

C. , II & III

D. I only

E. & III

View answer

Correct Answer: D

Question #124

You believe the stock of Microsquish reflects a 90% chance of a dismissal of its contractual liability suit. If the suit is dismissed, you expect the stock of Microsquish and its partner, AWOL, to rise. If the suit is not dismissed, both will fall in price. However, you think that AWOL's stock only reflects a 60% chance of dismissal of this suit. What strategy would be optimal?

A. ell both short

B. uy Microsquish

C. ell AWOL

D. uy AWOL

View answer

Correct Answer: D

Question #125

Standard V (A) deals with ________.

A. rohibition against Use of Material Nonpublic Information

B. isclosure of Conflicts to Clients and Prospects

C. rohibition against Misrepresentation

D. isclosure of Referral Fees

E. erformance Presentation

View answer

Correct Answer: A

Question #126

Joseph Silk is a veteran money manager with Aakanksha, Inc., a hedge fund that caters to high net-worth individuals. His friend, Gribbin, recently incorporated a private business and invited Joseph to be on its board of directors. Gribbin's business is in the paper industry and does not directly or indirectly affect Aakanksha's client base. Joseph accepted the board membership with the understanding that he would participate in Gribbin's business only over the weekends. He considered this a private venture

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

B. ot violated any standards since there is no conflicts of interest between his two professional obligations

C. iolated Standard IV (A

D. iolated Standard IV (B

View answer

Correct Answer: A

Question #127

What disadvantage(s) are there of the mean deviation?

A. one of these answers

B. t is based on only two observations

C. t is based on deviations from the mean

D. ll of these answers

E. t uses absolute values, which are difficult to manipulate

View answer

Correct Answer: E

Question #128

A credit entry to Allowance for Uncollectible Accounts

A. ncreases the balance

B. either of these answers is correct

C. oth of these answers are correct

D. ncreases net receivables

View answer

Correct Answer: A

Question #129

Eric Webb, an individual investor in a high tax bracket, would like to purchase a 5-year zero-coupon security with no credit risk. His investment adviser has recommended U.S. Treasury STRIP securities, and has told Webb that either coupon strips or principal strips would meet his needs. Which of the following statements is TRUE regarding the investment adviser's recommendation?

A. hile principal strips have no credit risk, there is credit risk in coupon strips

B. he adviser should have informed Webb that the principal strips have higher reinvestment risk than the coupon strips

C. he adviser should have informed Webb that STRIP securities may have negative tax consequences related to accrued interest

View answer

Correct Answer: C

Question #130

If you deposit $500 today into an account paying 8% per year, compounded quarterly, how much will be in the account after 60 months?

A. 717

B. 702

C. 751

D. 724

E. 742

View answer

Correct Answer: E

Question #131

Under AIMR Rules of Procedure for the Proceeding Related to Professional Conduct, membership in AIMR and/or the right to hold and to use the CFA designation may be summarily suspended by AIMR's Designated Officer for the following misconduct:

A. onviction for a crime that is defined as a felony or its equivalent

B. only

C. and II only

D. V only

E. I only

View answer

Correct Answer: G

Question #132

Under inflationary conditions and stable inventories, the COGS under Average Cost method:

A. ower than FIFO COGS

B. ould be greater or less than FIFO COGS

C. igher than FIFO COGS

D. s higher than LIFO COGS

View answer

Correct Answer: C

Question #133

Amartya is currently managing the investment fund for a charitable institution and has his fiduciary duties bound by the UMIFA (Uniform Management of Institutional Funds) rules. His colleague, Bhagwati, is a trustee of a personal trust fund set up by the late R. D. Tata, a famous industrialist. Which of the following is/are true about this situation?

A. martya\'s behavior as a trustee is governed by the "Prudent Man Rule

B. II only

C. and II only

D. , II and III

E. only

View answer

Correct Answer: A

Question #134

How many deposits of $250 a month, beginning next month, are needed before an account has $200,000 in it, assuming it had a balance of $0 at the beginning and that interest is 6% per year, compounded monthly?

A. 19

B. o solution/Error

C. 22

D. 00

E. 6

View answer

Correct Answer: C

Question #135

An analyst valuing the non-controlling shares of a closely held company is using a similar firm quoted on the NASDAQ with relatively high trading volume as his base for a comparable company analysis. He is most likely to use the shares of the publicly traded comparable company and apply:

A. nly a marketability discount

B. nly a minority interest discount

C. oth a marketability and minority interest discount

View answer

Correct Answer: A

Question #136

According to FASB, initial franchise fees should be recognized as income when

A. he franchisee shows the ability to pay the fee

B. he franchisor has substantially performed or satisfied all material services and conditions

C. he franchisor has collected the majority of fee in cash

D. he franchisor bills the franchisee

View answer

Correct Answer: B

Question #137

Peterborough's capital structure was as follows:Dec. 31, 1995 Dec. 31, 1996Outstanding shares of stock:Common $110,000 $110,000Convertible preferred $10,000 $10,0008% convertible bonds $1,000,000 $1,000,000During 1996, Peterborough paid dividends of $3.00 per share on its preferred stock. The preferred shares are convertible into 20,000 common shares and are considered common stock equivalents. The 8% bonds are convertible into 30,000 common shares but are not considered common stock equivalents. Net income

A. 7

B. 6

C. 6

D. 7

E. 7

View answer

Correct Answer: C

Question #138

Which of the following would affect the comparison of financial statements across two different firms?

A. ifferent accounting principlesII

B. and IV

C. , III and IV

D. , II, III and IV

E. and II

View answer

Correct Answer: C

Question #139

Which of the following statements regarding confidence levels and/or tests of significance is/are false? Choose the best answer.

A. n most hypothesis tests, the significance level is set equal to 0

B. ll else equal, the probability of a Type I error decreases as the level of confidence increases

C. he probability of a Type I error is denoted by the Greek letter alpha

D. he confidence level of a hypothesis test can be found by subtracting the level of significance from the number one

E. ore than one of these answers is false

View answer

Correct Answer: F

Question #140

The population of Tunisia is 100 million; 5 million are unemployed and 90 million hold jobs. The employment rate in Tunisia is

A. 0 percent

B. percent

C. 5 percent

D. 5 percent

View answer

Correct Answer: A

Question #141

If you deposit $123 into an account paying 6% per year simple interest, what is the balance in your account 8 months later?

A. 182

B. 246

C. 123

D. 127

E. 131

View answer

Correct Answer: D

Question #142

Ron Travis, CFA, manages a portfolio of long-term and short-term bonds. The portfolio is equally weighted between 1-year, 2-year, 10-year, and 20-year maturities and currently has a portfolio duration equal to 7.0. Travis is concerned that 1- and 2-year interest rates are going to increase by 100 basis points while 10- and 20-year rates decrease by 100 basis points. If his prediction is correct, Travis' measure of duration will be ineffective at predicting interest rate risk since portfolio duration is only

A. ield curve does not shift

B. hift in the yield curve is parallel

C. ield curve steepens

View answer

Correct Answer: B

Question #143

Standard I deals with ________.

A. se of Professional Designation

B. uty to Employer

C. bligation to Inform Employer of Code and Standards

D. rofessional Misconduct

E. lagiarism

View answer

Correct Answer: F

Question #144

Under Standard III (E) - Responsibilities of Supervisors - which of the following are NOT responsible for maintaining appropriate supervision when they are in a supervisory role?

A. IMR members

B. FA charterholders

C. one of these answers

D. evel I CFA candidates

E. FA candidates

View answer

Correct Answer: C

Question #145

According to the AIMR-PPS, composites must be asset weighted using

A. nd-of-period weightings

B. iddle-of-period weightings

C. erformance-period weightings

D. eginning-of-period weightings

View answer

Correct Answer: D

Question #146

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

A. utline permissible conduct

B. elineate procedures for reporting violations and sanctions

C. e easy to understand

D. utline the scope of the procedures

E. esignate a compliance officer

View answer

Correct Answer: F

Question #147

Sunil Vaskar is an employee of Glamorgan, a reputable investment banking firm. Glamorgan is a major underwriter for an equity issued by a private firm, Raindrop Waterworks. Sunil has accidentally discovered that the preliminary prospectus issued by Raindrop contains material overstatements about the scope of its businesses and future earning potential. Sunil:

A. ust report his findings to his supervisor and consult his legal department

B. ust sever all connections with Glamorgan and dissociate himself from its activities

C. eed not do anything because the prospectus has been distributed and is, in any case, preliminary

D. ust report the case to the SEC since there has been a violation of laws governing equity issues

View answer

Correct Answer: A

Question #148

A researcher has rejected the null hypothesis. The p-value in the test must be:

A. ess than the significance level

B. ore than 1-significance level

C. ess than 1-significance level

D. ore than the significance level

View answer

Correct Answer: A

Question #149

If you deposit $4,250 today into a savings account paying 6% per year, compounded semiannually, how much is in your account in 4 years?

A. 5,365

B. 6,773

C. 6,000

D. 4,783

E. 5,383

View answer

Correct Answer: E

Question #150

In the 1980s, the government cut back on the tax rates in an effort to spur the economy. This led to a significant decrease in real tax revenues. A breakdown of this decrease indicated that most of the decrease came from the lower tax brackets. Tax revenues from top tax bracket actually increased despite the cut. There was a modest growth in the GDP during this period, though amongst all the industrialized nations, only Japan matched this rate. This empirical evidence indicates that:

A. he supply side effects are not as potent as hypothesized by economists

B. he supply-side response of tax payers can have a strong effect on a nation's growth

C. he Rational Expectations model is a fair description of how people respond to fiscal policy

D. he tax avoidance behavior governing the demand side has a significant impact on the economy

View answer

Correct Answer: B

Question #151

Which of the following is NOT a violation of Standard III (B) - Duty to Employer?

A. sing the current employer's client list for personal independent practice

B. endering services to independent clients without informing them about your current employment status but after obtaining written permission from the current employer

C. rovide free tax assistance to "low-income" people on a volunteer basis, without expecting or accepting any compensation when some of these people can be potential clients of your current employer

D. one of these answers

View answer

Correct Answer: C

Question #152

Carl Pagan lives in Meesopotamia, where insider trading is not considered a crime. His friend, Ann Dreen, lives in Gondwana, where an investment professional must report any knowledge of criminal activity to the appropriate authorities. The AIMR code of ethics bars insider trading but does not require one to report criminal activity to authorities. With regard to insider trading, Carl must follow ________ and with respect to reporting of criminal activity, Ann must follow ________.

A. eesapotamian law; AIMR code

B. IMR code; Gondwana law

C. eesapotamian law; Gondwana law

D. IMR code; AIMR code

View answer

Correct Answer: B

Question #153

If an independent auditor has not become satisfied by means of other auditing procedures with respect to opening inventories, they should

A. ither disclaim an opinion on the statement of income or qualify the opinion thereon, regardless of the degree of materiality of the amounts involved

B. ither disclaim an opinion on the statement of income or qualify the opinion thereon, depending on the degree of materiality of the amounts involved

C. isclaim an opinion or qualify the opinion on the statements as a whole

D. xpress an adverse opinion on the statements taken as a whole when the amount in question is material

View answer

Correct Answer: B

Question #154

Which of the following would not be reported as an extraordinary item?

A. ain or loss on sale of fixed assets

B. ain or loss from passing of a new law

C. ain or loss from early retirement of debt

D. ninsured loss from a flood

View answer

Correct Answer: A

Question #155

When a researcher uses the classes 129-147, 147-165, 165-183 to create a distribution, he is violating which of the following suggested practices?

A. void a use of non-standard class marks

B. void a use of open-ended classes

C. void a use of uneven classes

D. void a use of overlapping classes

View answer

Correct Answer: D

Question #156

What is the relationship among the mean, median and mode in a symmetric distribution?

A. ean is always the smallest value

B. ean is always the largest value

C. one of these answers

D. ode is the largest value

E. ll equal

View answer

Correct Answer: E

Question #157

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

A. 6,000

B. $17,000)

C. 3,000

D. $14,000)

View answer

Correct Answer: D

Question #158

A study of business faculty at state supported institutions in Ohio revealed that the mean salary for nine months is $52,000 and the standard deviation of the sample is $3,000. The study also showed that the faculty had been employed an average (mean) of 15 years with a standard deviation of 4 years. How does the relative dispersion in the distribution of salaries compare with that of the lengths of service?

A. alaries about 6%, service about 27%

B. alaries about 100%, service about 50%

C. alaries about 2%, service about 6%

D. one of these answers

E. alaries about 42%, service about 81%

View answer

Correct Answer: A

Question #159

Bond X and Bond Y were issued at a premium to par value three years ago. Bond X matures in five years, and Bond Y matures in ten years. Both bonds carry the same credit rating. Bond X has a coupon of 7.25%, and Bond Y has a coupon of 8.00%. Currently the required yield for both bonds is 7.60%. Determine whether each bond is currently priced at a premium or discount to par value.

A. oth bonds are priced at a premium

B. ond X is priced at a premium, and Bond Y is priced at a discount

C. ond X is priced at a discount, and Bond Y is priced at a premium

View answer

Correct Answer: C

Question #160

A perpetual preferred stock has a face value of $1,000 and a coupon rate of 6% per year. If it is issued at $850, what's the implicit annual discount rate?

A.

B.

C.

D.

View answer

Correct Answer: D

Question #161

A firm has just experienced a LIFO liquidation under inflation. Which of the following could be true?

A. he firm's purchases were lower than the number of units sold

B. I only

C. & III

D. I & III

E. , II & III

View answer

Correct Answer: D

Question #162

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 common equity equals ________.

A.

B.

C.

D.

View answer

Correct Answer: A

Question #163

Higher unemployment insurance benefits tend to increase unemployment because they

A. educe the opportunity cost of job search and hence decrease the search time

B. ncrease the opportunity cost of job search and hence increase the search time

C. educe the opportunity cost of job search and hence increase the search time

D. ncrease the opportunity cost of job search and hence decrease the search time

View answer

Correct Answer: C

Question #164

How much would an original deposit of $500 grow to be after 8 and a half years, if the deposit earns interest at 6.5% per year, compounded quarterly?

A. 853

B. 573

C. 4,254

D. 837

E. 864

View answer

Correct Answer: E

Question #165

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

A. one of these answers is correct

B. s not zero

C. quals the computed sample correlation

D. s zero

E. ould be zero

View answer

Correct Answer: B

Question #166

Each of the following is true regarding Standard II (A), except:

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

B. his standard relates to business cards and letterheads

C. his standard does not relate to oral statements

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

E. ll of these answers

View answer

Correct Answer: C

Question #167

Krissy Steele, CFA, manages money for high net worth individuals. Steele develops unique investment policies for all of her clients and uses various investment funds to construct portfolios. However, Steelehas beenreluctant to use hedge funds. Which of the following statements made by Steele is least likely to be correct?

A. he volatility of historical returns associated with hedge fund indexes understates their true risk level

B. edge fund returns are normally distributed

C. ublished information on hedge fund returns is based on incomplete historical data

View answer

Correct Answer: B

Question #168

Each of the following transactions has the effect of reducing retained earnings except ________.

A. ash dividends

B. tock splits

C. tock dividends

D. ividends in kind

View answer

Correct Answer: B

Question #169

Which of the following is/are advantages of accelerated methods of depreciation?

A. hey implicitly recognize the loss of productivity and increased maintenance costs over time

B. & III

C. I only

D. , II & III

E. & II

View answer

Correct Answer: C

Question #170

Tracy company reports the following in its statement of cash flows:Net Income $1,000Depreciation and Amortization 350Decrease (Increase) in Accounts receivable (10)Decrease (increase) in inventory 200Decrease (increase) in prepaid expenses 80Increase (decrease) in trade payables (300)Increase (decrease) in taxes payable 75Cash Flow from operations 1,395If Tracy shows cost of goods sold of $2,050 on its income statement, cash paid to suppliers is

A. 2,650

B. 1,550

C. 1,950

D. 2,150

View answer

Correct Answer: D

Question #171

According to Standard IV (B.7), Disclosure of Conflicts, the most prevalent conflict pertains to ________.

A. embers' ownership of stock in companies they recommend

B. roker-sponsored limited partnerships formed to invest venture capital

C. ervice on a board of directors

D. one of these answers

View answer

Correct Answer: A

Question #172

If unemployment was deemed too high by policy makers, which of the following policy tools might be utilized?

A. ecrease the money supply

B. orrow to finance new military spending

C. educe government debt

D. ncrease target interest rates

E. educe both taxes and government spending

View answer

Correct Answer: B

Question #173

In the simple Keynesian model, if equilibrium output is less than the level required for full employment, what must happen for full employment to be achieved?

A. ggregate demand must fall

B. nterest rates must rise

C. ggregate supply must increase

D. rices must rise

E. ggregate demand must increase

View answer

Correct Answer: E

Question #174

In periods of rising prices, which inventory costing method results in the highest net income?

A. IFO

B. verage cost

C. erpetual

D. IFO

View answer

Correct Answer: A

Question #175

Simon Steel Inc. had the following unusual financial events occur this year: Bonds payable were retired 5 years before their scheduled maturity, resulting in a $260,000 gain, Simon has frequently retired bonds early when interest rates declined significantly. A steel forming segment suffered $255,000 in losses from hurricane damage. This was the fourth similar loss sustained in a 5-year period at that location. A segment of Simon's operations, steel transportation, was sold at a net loss of $350,000. This w

A. 260,000

B. (345,000)

C. 5,000

D. (90,000)

E. (350,000)

View answer

Correct Answer: A

Question #176

The ________ of portfolio performance over time is a measure of the variability or dispersion of the historical returns around their central tendency or mean return.

A. ariance

B. tandard deviation

C. ean variance

D. ode

View answer

Correct Answer: B

Question #177

After a sterling year, your boss has decided to reward you. She has offered you three alternatives:Take $28,000 right now.Take $2,500 bonus per month for the next 12 months, starting next month. Take $16,000 at the end of six months and another $15,000 at the end of the year. If your discount rate is 6% per year on a monthly compounded basis, how much is the present value of your bonus?

A. 29,656

B. 29,047

C. 28,000

D. 30,176

View answer

Correct Answer: A

Question #178

A study of the opinion of designers with respect to the primary color most desirable for use in executive officesshowed that:Primary Color Number of OpinionsRed 92Orange 86Yellow 46Green 91Blue 37Indigo 46Violet 2What is the probability that a designer does not prefer yellow?

A.

B.

C. one of these answers

D.

E.

View answer

Correct Answer: B

Question #179

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

A. 7

B.

C. 07

D.

View answer

Correct Answer: C

Question #180

How much would you need to deposit today in order to be able to withdraw $2,500 in 2 years and $1,500 in 5 years, if the account has nothing in it today and interest is 8% per year, compounded annually?

A. 2,722

B. 3,429

C. 3,164

D. 4,000

E. 3,378

View answer

Correct Answer: C

Question #181

Of 900 consumers surveyed, 414 said they were very enthusiastic about a new home decor scheme. What is the 99% confidence interval for the population proportion (in percent)?

A. 2 and 50

B. one of these answers

C. 0 and 40

D. 0 and 60

E. 1 and 51

View answer

Correct Answer: A

Question #182

Allison Coleman, CFA, owns a bond portfolio that includes Bond X, a callable bond with ten years to maturity that is callable at any time beginning one year from today. Coleman's portfolio also includes Bond Y, a noncallable security with ten years to maturity that carries the same credit rating as Bond X. Coleman expects interest rates to drift steadily lower over the next few years. Based on this assumption, Coleman should expect that:

A. ond Y will experience a larger decrease in value than Bond X

B. ond X will benefit from positive convexity as rates decline

C. he option embedded in Bond X will increase in value

View answer

Correct Answer: C

Question #183

If restrictive monetary policy results in a deceleration in the domestic inflation rate and higher real interest rates, other things constant, the

A. ation will run a current account surplus

B. ation's currency will appreciate

C. ation will run a capital account deficit

D. ation will run a balance of trade surplus

E. ation's currency will depreciate

View answer

Correct Answer: B

Question #184

Jack George is evaluating Dunger Inc., a waste management firm. The company has been experiencing a strong 15% growth rate, which is forecasted to continue over the next three years before growth settles down to a sustainable level. Dunger's annual return on equity is expected to be 10%. The company recently paid a dividend of $0.50 per share from reported earnings of $2.50 per share. George has calculated a 10% weighted average cost of capital for Dunger Inc. The firm has no debt. The company's last report

A. ot buy the stock because its intrinsic value is $32 per share

B. uy the stock because its intrinsic value is $38 per share

C. uy the stock because its intrinsic value is $41 per share

View answer

Correct Answer: A

Question #185

Which of the following is true regarding probability?

A. < P(E) < 1: the probability of an event E is a number between 0 and 1, exclusive

B. II only

C. and II

D. one of these answers is correct

E. I and III

View answer

Correct Answer: A

Question #186

How much would an original deposit of $900 grow to be after 10 and a half years, if the deposit earns interest at 6.5% per year, compounded quarterly?

A. 1,853

B. 1,254

C. 1,573

D. 1,771

E. 1,837

View answer

Correct Answer: D

Question #187

Suppose we set the criterion for the rejection of the null that is extremely lax, assuring us that the null will not be rejected. Then, which of the following is/are true?

A. he probability of a Type I error is zero

B. & III

C. I only

D. I & III

E. one of these answers

View answer

Correct Answer: E

Question #188

A cumulative frequency distribution on days absent during a calendar year by employees of a manufacturing company is shown below.Days Absent Cumulative Number of Employees0 - 2603 - 5316 - 8149 - 11612 - 142How many employees were absent between 3 and 5 days?

A. 9

B. 7

C. 4

D. 1

E.

View answer

Correct Answer: B

Question #189

Which of the following is not one of the five steps in the hypothesis testing procedure?

A. dentify the test statistic

B. ll of these answers are part of the five steps

C. elect a level for beta

D. tate the null and alternate hypothesis

E. ormulate a decision rule

View answer

Correct Answer: C

Question #190

Which of the following could cause a firm's equity position to be weaker than is reflected in the balance sheet.

A. ll of these answers

B. olding held-to-maturity securities in a portfolio with non-amortized discounts

C. olding available-for-sale securities in a portfolio that have unrealized losses

D. one of these answers

E. olding trading securities in a portfolio with unrealized gains

View answer

Correct Answer: C

Question #191

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

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

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

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

D. efore income from continuing operations

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

View answer

Correct Answer: E

Question #192

Standard II (C) - Prohibition against Plagiarism - addresses all of the following forms of communication, except:

A. nternet communications

B. ral presentations

C. lectronic data transfer

D. ritten presentations

E. udio/visual presentations

View answer

Correct Answer: F

Question #193

The following data have been extracted from the financial statements of a firm for two years, 1985 and 1986:1985 1986Assets 4,376 5,214Sales 8,312 7,845Receivables 985 756Inventory 1,108 1,243COGS 5,494 4,971The inventory turnover ratio and the average inventory processing period for 1986 equal ________.

A.

B.

C.

D.

View answer

Correct Answer: A

Question #194

Use the following financial data on Enterprise:

A. ale of equipment$32,000

B. oss on equipment sale$9,000

C. ividends paid$12,500

D. urchase of an office suite$104,000

E. ommon stock repurchase$45,000

View answer

Correct Answer: B

Question #195

The probability that events A and B do not occur simultaneously equals 0.77. The probability of neither A nor B occurring equals 0.38. If P(A) equals 0.26, the probability of B occurring equals ________.

A.

B.

C.

D.

View answer

Correct Answer: B

Question #196

If a firm's profit margin increases by 8%, the debt-to-equity ratio increases from 35% to 55% and its asset turnover falls by 20%, the effect on its ROE is ________.

A. 1

B. 0

C. 0

D. 1

View answer

Correct Answer: C

Question #197

Assume that Polaroid decides to build a camera-research facility in Twin Falls, Idaho. The plant will employ 1,000 workers who will be guaranteed full-time jobs at annual earnings of $25,000. If the marginal propensity to consume in Twin Falls is 3/4, what change in income will result from operation of the plant for one year?

A. 75 million

B. 50 million

C. 25 million

D. 100 million

View answer

Correct Answer: D

Question #198

Which of the following statements about the AIMR Performance Presentation Standards is true?

A. ll aspects of the AIMR Performance Presentation Standards are mandatory

B. one of these answers is true

C. ll aspects of the AIMR Performance Presentation Standards are recommended

D. ome aspects of the AIMR Performance Presentation Standards are mandatory, while others are recommended

View answer

Correct Answer: D

Question #199

According to the AIMR-PPS, assets assigned to subadvisors that are not part of the firm

A. re not to be included in total firm assets and their performance record is, therefore, not part of the firm's performance record

B. re included in total firm assets at the investment manager's discretion and information regarding their inclusion should be included in the disclosures

C. re to be included in total firm assets, however, because they are subadvisors, their performance record is not part of the firm's performance record

D. re to be included in total firm assets, hence, their performance record is part of the firm's performance record

View answer

Correct Answer: A

Question #200

In a statistical regression estimation, the R-square is found to be 39% and the slope coefficient is -0.3. The percentage of variance of the dependent variable not explained equals ________.

A.

B.

C.

D.

View answer

Correct Answer: B

Question #201

Which of the following is NOT a deferred credit item?

A. eferred gain on installment sales

B. one of these answers

C. eferred tax credits

D. dvance rental payments

View answer

Correct Answer: B

Question #202

One way for a company to increase its book value per share is to ________.

A. ssue long-term debt

B. ncrease dividend payout ratio

C. uy back shares at market prices below their book value

D. etire long-term debt

View answer

Correct Answer: C

Question #203

Swiss Inc. had the following activities during 1996:Acquired 2,000 shares of stock in Molly Inc. for $26,000.Sold an investment in General Motors for $35,000 when the carrying value was $33,000.Acquired a $50,000, 4-year certificate of deposit from a bank. (During the year, interest of $3,750 was paid to Swiss.)Collected dividends of $1,200 on stock investments.In Swiss's 1996 statement of cash flows, net cash used in investing activities should be ________.

A. 37,250

B. 76,000

C. 41,000

D. 39,800

E. 38,050

View answer

Correct Answer: C

Question #204

When referring to foreign exchange trades, "American terms" refers to:

A. direct quote outside the U

B. rades by Americans living abroad

C. he number of foreign currency units per U

D. n indirect quote in the U

E. he number of U

View answer

Correct Answer: E

Question #205

Which of the following is considered a characteristic of equity?

A. one of these answers

B. ll forms of equity must ultimately be repaid by a business

C. ompensation to the holders of equity takes precedence over that required to the holders of liabilities

D. quity represents the residual ownership of a business

E. quity represents a claim against a business that is senior to liabilities

View answer

Correct Answer: D

Question #206

If the quality of education in the U.S. improved, the direct effect would be a(n)

A. eduction in prices

B. ncrease in both output and prices

C. ncrease in both long-run and short-run aggregate supply

D. ncrease in both short-run aggregate supply and aggregate demand

View answer

Correct Answer: C

Question #207

The best indication of a firm's present and continuing ability to generate favorable cash flows is information about enterprise earnings based on which of the following basis?

A. ax accounting

B. ash accounting

C. odified cash accounting

D. ccrual accounting

E. odified accrual accounting

View answer

Correct Answer: D

Question #208

The main use of the balance sheet for creditors would be

A. o forecast future cash flow needs

B. o review the short-term liquidity of the firm

C. o forecast cash collections

D. o forecast changes in fixed assets thereby assisting in the firm's profitability

E. o provide information about the nature of assets that the firm uses as debt collateral

View answer

Correct Answer: E

Question #209

The significance level in hypothesis testing refers to the:

A. robability of Type II error

B. -probability of Type I error

C. oint significance of the associated regression, indicated by the F-statistic

D. robability of Type I error

E. one of these answers

View answer

Correct Answer: D

Question #210

Since return results must be calculated on a basis that includes the effect of leverage, return results must be restated to a(n) ________ basis.

A. argin

B. otal asset

C. ash flow

D. ll cash

E. ultiple cash

View answer

Correct Answer: D

Question #211

What is the Net Present Value of this series of annual cash flows: Year 0: <$20,000>, Year 1: $15,000, Year 2:$5,000, Year 3: $7,500, using an interest rate of 10% per year? (Note that the <> are used to indicate a negative number).

A. 2,851

B. 3,512

C. 48

D. 4,116

E. 3,403

View answer

Correct Answer: E

Question #212

Which of the following would not be an expected impact of a debt pay down program?

A. decrease in aggregate demand

B. shift to the left in the aggregate supply curve

C. n increase in unemployment

D. decrease in the price level

E. alling interest rates

View answer

Correct Answer: B

Question #213

If business decision makers suddenly become more optimistic about future sales and profits, which of the following will most likely occur?

A. he interest rate will fall, causing both investment and GDP to rise

B. ncome will increase and actual saving will remain constant

C. ctual investment will increase but consumption will decrease, leaving GDP unchanged

D. nvestment will increase, causing both aggregate demand and GDP to increase

View answer

Correct Answer: D

Question #214

In the full cost method, oil firms:

A. one of these answers

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

C. ust expense drilling costs which result in productive oil wells

D. an capitalize all oil-drilling costs

View answer

Correct Answer: D

Question #215

Which of the following can be found in Standard II?

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

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

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

D. embers shall not misrepresent investment performance

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

View answer

Correct Answer: B

Question #216

If alpha = .05, what is the probability of making a Type I error?

A. one of these answers

B. 0/20

C.

D. 9/20

E. /20

View answer

Correct Answer: E

Question #217

Suppose a research firm conducted a survey to determine the average amount of money steady smokers spend on cigarettes during a week. A sample of 500 steady smokers revealed that the sample mean is $20 and the sample standard deviation is $5. What is the point estimate?

A. 20

B. one of these answers

C. 25

D. 0

E. 5

View answer

Correct Answer: A

Question #218

A passive budget deficit is a deficit that

A. erely reflects a decline in tax revenue during an economic boom

B. esults from legislative action that reduces tax rates

C. esults from legislative action that increases government expenditures

D. erely reflects a decline in tax revenue during a recession

View answer

Correct Answer: D

Question #219

Seeing that the unemployment rate is reaching new highs each month, several Senators group together to propose major tax cuts and spending increases to stimulate the economy. Both the increased spending and tax cuts will be implemented in the following January, more than six months away. Due to major public outcry, these bills pass through legislature very quickly. During the six months in between passage and implementation, the unemployment rate begins to fall. Another year passes, now 18 months after the

A. ecognition lagII

B. , II, III, IV

C. , II, III

D. only

E. I only

View answer

Correct Answer: E

Question #220

The primary determinant of a fiduciary's powers and duties are to be found in the ________.

A. oard of director's meeting minutes

B. overning documents (trust documents & investment management agreements)

C. DIC General Rules

D. RISA Statement of Procedures

E. one of these answers

View answer

Correct Answer: B

Question #221

Standard V (A), Prohibition against Use of Material Nonpublic Information applies to

A. ll members of the investment community

B. ecipients of information who are not directly or indirectly associated with the firm the material nonpublic information is about

C. ecipients of information who are directly or indirectly associated with the firm the material nonpublic information is about

D. one of these answers

View answer

Correct Answer: B

Question #222

Which of the following AIMR Standards states that client transactions must have priority over transactions in which the analyst is a beneficial owner?

A.

B. one of these answers

C. II

D. I

View answer

Correct Answer: B

Question #223

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

A. $45,500)

B. $41,000)

C. one of these answers

D. $48,000)

View answer

Correct Answer: D

Question #224

How much would an original deposit of $1,500 grow to be after 8 and a half years, if the deposit earns interest at 6.5% per year, compounded quarterly?

A. 870,183

B. 3,601

C. 2,541

D. 2,594

E. 1,570

View answer

Correct Answer: D

Question #225

Standard IV (B.3) deals with ________.

A. uty to Employer

B. rofessional Misconduct

C. nteractions with Clients and Prospects

D. one of these answers

E. rohibition against Use of Material Nonpublic Information

View answer

Correct Answer: G

Question #226

Gus McCray, CFA, went long one oil futures contract at a price of SI 10 on Monday. Oil closed at $115 on Wednesday, and the contract expired on Thursday with oil at $117. To maximize his gain, McCray should:

A. ave closed out his position by selling one oil futures contract close to expiration

B. ave accepted cash settlement on his long position

C. e indifferent between closing out his position by selling the contract and accepting cash settlement

View answer

Correct Answer: C

Question #227

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

A. 707

B. 387

C. 494

D. 0

E. 592

View answer

Correct Answer: E

Question #228

The standard normal probability distribution is one which has:

A. mean of 0 and any standard deviation

B. mean of 0 and a standard deviation of 1

C. ny mean and a standard deviation of 1

D. mean of 1 and any standard deviation

E. one of these answers are correct

View answer

Correct Answer: B

Question #229

If the alternate hypothesis specifies a particular direction for the population parameter, it is appropriate to use:

A. z-statistic test

B. stratified sampling test

C. one-tailed test

D. two tailed test

View answer

Correct Answer: C

Question #230

If alpha = .05 for a two-tailed test, how large is the acceptance area?

A.

B. one of these answers

C.

D.

E.

View answer

Correct Answer: C

Question #231

Which Standard deals with personal integrity and prohibits individual behavior that reflects badly on the investment industry?

A. II (C)

B. (D)

C. I (B)

D. II

E. one of these answers

View answer

Correct Answer: B

Question #232

The following is true about liquidating dividends:

A. ll of these answers

B. hese dividends return part of the original investment to the stockholders

C. he cash dividend account is closed to retained earnings

D. hey only occur when the company is making a major acquisition

View answer

Correct Answer: B

Question #233

A statistician has framed his hypothesis testing problem as:Ho: mean = 0H1: mean > 0For the given sample, he calculates the z-statistic. Then, the region of rejection at the 99% level is given by:

A. -statistic > +2

B. -statistic < 1

C. -statistic < -2

D. -statistic > +1

View answer

Correct Answer: A

Question #234

What can we say if the coefficient of determination is 0.94?

A. irection of relationship is positive

B. 4% of total variation in one variable is explained by variation in another variable

C. ll of these answers are correct

D. trength of relationship is 0

E. one of these answers is correct

View answer

Correct Answer: B

Question #235

The balance sheet

A. eports all of the cash inflows and shows specifically how that cash was used

B. s a report that shows the change in the financial position of a firm

C. eports the firm resources and how those resources were specifically used

D. eports the firm resources, claims on those resources, and stockholders' equity at specific points in time

E. eports the assets and liabilities of the firm for the accounting period

View answer

Correct Answer: D

Question #236

What is the level of significance?

A. one of these answers

B. robability of a Type II error

C. eta error

D. -vale of 1

E. robability of a Type I error

View answer

Correct Answer: E

Question #237

If you buy a computer for $950 and agree to pay for it with 24 payments of $35 with the first payment occurring next month, what is the size of the final payment needed at month 24 to completely pay off the computer? Assume the interest rate you are being charged is 16% per year, compounded monthly.

A. 294

B. 0

C. 207

D. 87

E. 323

View answer

Correct Answer: E

Question #238

To the extent that people eventually adjust to demand stimulus policies, persistent expansionary macropolicy will lead to

A. ower money interest rates

B. reduction in the long-run unemployment

C. nflation with no permanent reduction in unemployment

D. ore rapid economic growth but no change in prices

View answer

Correct Answer: C

Question #239

What is the following table called?Number of Heads Probability of Outcome01/8 = 0.12513/8 = 0.37523/8 = 0.37531/8 = 0.125Total 8/8 = 1.000

A. give

B. tandard deviation

C. robability distribution

D. one of these answers

E. requency table

View answer

Correct Answer: C

Question #240

Chris South owns $25,000 face value of Bradco bonds, which have a 7% coupon, pay interest semiannually, and have six years remaining until maturity. The bonds are callable at par. The bonds were rated A when Chris bought them at par two years ago, and they are currently worth $26,225, with a rating of A

A. Which of the following statements most accurately describes the change in the risk of the Bradco bonds?

A. all risk has decreased

B. iquidity risk has increased

C. redit risk has decreased

View answer

Correct Answer: C

Question #241

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

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

B. onsidered as "Goodwill

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

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

View answer

Correct Answer: B

Question #242

If you deposit $10,000 into an account paying 6% per year, compounded semiannually, how much do you have in the account in 8 years?

A. 15,938

B. 16,047

C. 12,667

D. 14,800

E. 25,403

View answer

Correct Answer: B

Question #243

The semiannually compounded rate is 10% quoted on an annualized basis. The equivalent annually compounded rate is:

A. 0

B. 0

C.

D. 0

View answer

Correct Answer: A

Question #244

To claim compliance with the AIMR Performance Presentation Standards,

A. t least 1/2 of the investment managers in the firm must comply with the Standards

B. he entire firm must comply with the Standards

C. one of these answers

D. t least 3/4 of the investment managers in the firm must comply with the Standards

View answer

Correct Answer: B

Question #245

An operating cycle is:

A. he time frame from when a company purchases goods and or services to the point at which the company generates a receivable

B. he amount of time that a company allots to any individual product line

C. lways one full fiscal year

D. he circle of time from the commitment of cash for purchases until the collection of receivables resulting from the sale of goods or services

View answer

Correct Answer: D

Question #246

Routine physical examinations are conducted annually as part of a health service program for the employees. It was discovered that 8% of the employees needed corrective shoes, 15% needed major dental work and 3% needed both corrective shoes and major dental work. What is the probability that an employee selected at random will need either corrective shoes or major dental work?

A.

B.

C.

D.

E. one of these answers

View answer

Correct Answer: A

Question #247

Peter Black is an options trader for High Smith Investments. Black trades options on the U.S. and U.K. stock exchanges. Over the past three weeks, Black has been following the price movements of options on two companies: U.S.-based Pacific Chemicals Inc. (PCI), and U.K.-based Merchant Clothing Co. (MCC). Black has observed that over the past few days, the price of put options on PCI stock have suddenly increased, and the price of call options on MCC stock have suddenly increased. Which of the following prov

A. he U

B. he U

C. he U

View answer

Correct Answer: C

Question #248

Grazelle Garbo has decided to change the recommendation on one of the firms she is following from hold to buy. She has communicated her research report to her senior manager, who is reviewing it. If the recommendation passes muster, it will be released three days from now. In the meanwhile, Grazelle has decided to follow her research and purchase the stock for several of her clients' accounts for which the stock is an appropriate investment and for which she has discretionary investment powers. In the cours

A. iolated Standard IV (B

B. and II only

C. I only

D. II only

E. only

View answer

Correct Answer: D

Question #249

Because it is not the preferred method recommended by the PPS, the use of ________ valuation needs to be disclosed.

A. ew-date

B. ettlement-date

C. rade-date

D. ld-date

E. urvivor-date

View answer

Correct Answer: B

Question #250

The primary purpose of the statement of cash flows is to:

A. easure the change in the company's assets

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

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

D. nalyze net income during the accounting period

View answer

Correct Answer: C

Question #251

Which of the following statements about stock dividends is true?

A. tock dividends are dividends given in the form of stock from another company

B. tock dividends are more valuable than stock splits

C. tock dividends are recorded as a reduction in cash

D. tock dividends increase the number of shares outstanding

View answer

Correct Answer: D

Question #252

The average cost of tuition, room and board at a small private liberal arts college is reported to be $8,500 per term, but a financial administrator at Moravian College believes that the average cost is much higher. A study was conducted using 150 small liberal arts colleges and findings showed that the average cost per term is $9,000 with a standard deviation of $1,200. Let alpha = 0.05. The Ho: Mu less than or equal to $8,500. H1: Mu is bigger than $8,500.What is the critical z-value for this test?

A. 1

B. one of these answers

C. 1

D. 1

E. 1

View answer

Correct Answer: C

Question #253

"Book value per share" refers to:

A. he per share value of the company's assets less the liabilities

B. ll of these answers

C. he per share value of total equity of the firm

D. he per share value of the common stock accounts of a firm

View answer

Correct Answer: D

Question #254

Members ________ to be in compliance with the Performance Presentation Standards to be in compliance with Standard V (B).

A. re not required

B. ay be required

C. re always required

D. one of these answers

E. ill be required, as of 1/1/2001,

View answer

Correct Answer: A

Question #255

Which of the following is/ are true ?

A. ll Central bank transactions are excluded from the BOP account

B. & II

C. II only

D. I only

E. only

View answer

Correct Answer: B

Question #256

Which of the following can be found in Standard V?

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

B. embers shall not participate in plagiarism

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

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

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

View answer

Correct Answer: C

Question #257

Which of the following is/are true about expenses?

A. &D expenses must always be capitalized

B. , II & III

C. I & III

D. II only

E. only

View answer

Correct Answer: B

Question #258

Standard ________ pertains to fair dealing with customers and clients.

A. II (B)

B. V (3)

C. V (A)

D. (D)

E. one of these answers

View answer

Correct Answer: B

Question #259

If the effects of an expansionary macroeconomic policy are accurately anticipated, then

A. ages will rise more rapidly than product prices

B. arket participants will quickly adjust to the expected inflation

C. rofit margins will improve

D. esource prices will remain constant

View answer

Correct Answer: B

Question #260

Government regulation of charitable organizations and public pension plans:

A. as increased as these organizations have grown in size and importance

B. one of these answers

C. as lessened, since there is a growing trend away from charitable organizations since 1989

D. s still absent, although there is an effort to change this

View answer

Correct Answer: A

Question #261

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 = $300Given the above, the net income using Average Cost method is ________.

A. 279

B. 224

C. 381

D. 249

View answer

Correct Answer: A

Question #262

Assume you deposit $300 now into an account that had nothing in it previously, make an additional deposit of $400 in 1 year, and a final deposit of $200 in 4 years. How much is in your account in 6 years, if the account earns interest at 7% per year, compounded annually?

A. 418

B. 1,431

C. 1,120

D. 925

E. 1,240

View answer

Correct Answer: E

Question #263

Why do the corporation's directors declare stock dividends?

A. ll of these answers

B. o increase the number of shares outstanding

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

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

View answer

Correct Answer: A

Question #264

Which of the following about the multiplier is false?

A. dle resources are necessary before the multiplier can bring about an increase in real income

B. he size of the multiplier relates directly to the size of the marginal propensity to consume

C. t is defined as 1 / (1 - the marginal propensity to save)

D. t takes time for the multiplier to work

View answer

Correct Answer: C

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