Practice on 2024 LATEST CFA-Level-I Exam Updated 2200 Questions
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NEW QUESTION # 676
How many three-digit numbers can you form using the digits 1, 3, 5, 7 and 9 without a repeating a digit within the number to be formed?
- A. 0
- B. 1
- C. 2
Answer: B
NEW QUESTION # 677
Frequency distributions are useful for ALL BUT which of the following objectives?
- A. Condensation of large sets into smaller sets.
- B. Investigation of characteristics of each observation.
- C. Summarization of data.
Answer: B
Explanation:
They are useful in illustration of the amount of variability in data as well.
NEW QUESTION # 678
Mary A.Contrary has a SHORT position in 15 November heating oil contracts. She buys 15
December heating oil contracts. Ms. Contrary has:
I). closed her futures position by offset
II). initiated a new LONG futures position in addition to her existing SHORT position
III). initiated an exchange-for-physicals (EFP)
- A. II only.
- B. II and III.
- C. I only.
Answer: A
Explanation:
Ms. Contrary bought contracts with a different expiration from those she had previously sold.
In order to offset, the contracts bought and sold must be identical.
NEW QUESTION # 679
A valid test of the weak form of the EMH should incorporate which of the following?
I). only publicly available data
II). an estimate of all transactions costs
III). a risk adjustment of returns
- A. I, II and III.
- B. I and II.
- C. II and III.
Answer: A
Explanation:
All three must be incorporated. The absence of each has been used to criticize research on the EMH. Some studies used information that was not available to investors at the time the historical data was evaluated. Many studies did not explicitly account for transaction costs, even though these would clearly reduce profits. Finally, risk adjustments must be made. As an example, consider a trading strategy that looks at percentage price breakouts as described in the text. Large percentage price breakouts are more likely to be found in lower-priced stocks. Many of these are riskier, smaller firms, so a test like this would be biased toward riskier stocks and should require a higher return just to match the market.
NEW QUESTION # 680
Consider two bonds, A and B.
They are both issued by the same corporate firm. They both have the
same maturity, seniority, and coupon. The only difference between the two bonds is that A is callable and
B is not. Which of the following most likely best describe the relationship between A and B
- A. Bond A will have a lower yield than bond B
- B. Bond B will have a lower price than bond A
- C. Bond A will have a higher yield than bond B
Answer: C
Explanation:
Both bonds are identical except of the cal option embedded in bond A.
The option is granted
to the issuer by the investors. As compensation, the investors receive a higher yield.
NEW QUESTION # 681
If a researcher testing the null hypothesis H : 53 u 57 vs. H : u 53 or u > 57, found that is equal to 56
0 a
when in reality is 59, identify the type of error that has been made.
- A. None of the choices are correct.
- B. Type II
- C. Type I
Answer: B
NEW QUESTION # 682
Consider the following data: 1, 7, 3, 3, 6, 4 The mean and median for this data are:
- A. 4 and 3 1/2
- B. 4.8 and 3
- C. 4 and 3 1/3
Answer: A
Explanation:
Mean = (1+7+3+3+6+4)/6 = 4 Data arranged in ascending order: 1,3,3,4,6,7 Median =
(3+4)/2 = 3.5
NEW QUESTION # 683
Banks are required by law to keep on hand to back up its deposits a minimum reserve of their checking deposits. This reserve is known as:
- A. required reserves.
- B. borrowed reserves.
- C. excess reserves.
Answer: A
Explanation:
Excess reserves are actual reserves that exceed the legal requirement.
NEW QUESTION # 684
A portfolio manager has identified three asset classes, with 7, 9 and 6 securities respectively. He wants to put together a portfolio of three securities, with no more than one security from each asset class.
In how many ways can she achieve this?
- A. 0
- B. 1
- C. 2
Answer: C
Explanation:
This requires the multiplication rule of counting. No. of ways a portfolio can be created = 7 x
9 x 6 = 378
NEW QUESTION # 685
Which of the following combinations of interest rate options would replicate a 6-month by 9-month forward rate agreement to pay 5% fixed? The LIBOR below refers to the 3-month LIBOR.
- A. Long a 6-month call on LIBOR and short a 6-month put on LIBOR.
- B. Long a 9-month call on LIBOR and short a 9-month put on LIBOR.
- C. Long a 6-month call on LIBOR and long a 6-month put on LIBOR.
Answer: A
Explanation:
If LIBOR exceeds 5%, this combination will result in an inflow of funds just like an FRA. If
LIBOR drops below 5%, this combination will result in an outflow of funds just like an FRA
NEW QUESTION # 686
Beginning accounts receivable $ 50,000 Ending accounts receivable $ 30,000 Net sales $600,000
Cost of goods sold $375,000 Operating expenses $ 80,000
What was the amount of cash received from customers?
- A. $580,000
- B. $630,000
- C. $620,000
Answer: C
Explanation:
Cash received from customers = Net sales + Decrease in Accounts Receivable or - Increase in Accounts Receivable. $600,000 + ($50,000 - $30,000) = $620,000.
NEW QUESTION # 687
The Mod Company issued a zero-coupon bond on January 1, 20x0, due December 31, 20x4. The face value of the bond was $100,000. The bond was issued at an effective rate of 14% (compounded annually). The CFO before interest and tax in each year is $60,000. EBIT in each year is $70,000.
The cash proceeds of the bond issue are:
- A. $100,000.
- B. $51,937.
- C. $60,000.
Answer: B
Explanation:
Cash proceeds on a bond: 100,000/(1.14)5 = $51,937.
NEW QUESTION # 688
David Smith is a CFA member with supervisory responsibilities. However, due to his workload he has delegated a part of his supervisory responsibilities. What are Smith's responsibilities in terms of Standard
IV (C) - Responsibilities of supervisors?
- A. Smith still retains responsibility for all his subordinates.
- B. Smith no longer has any supervisory responsibility since he has delegated his responsibility.
- C. Smith may not delegate his supervisory responsibilities at all.
Answer: A
Explanation:
A supervisor may delegate his/her supervisory responsibility, however he/she still retain overall responsibility for his/her supervisory function.
NEW QUESTION # 689
Which of the following is NOT a true statement about rent control?
- A. The only people who benefit from rent controls are the poor.
- B. Consumers will have to spend more time searching for apartments if there are rent controls.
- C. In the long run, as demand increases, apartment shortages are likely to become more severe, and the quality of rent-controlled apartments is likely to decline.
Answer: A
Explanation:
Low apartment prices give landlords little incentive to maintain quality, and likewise, apartment will become even scarcer as demand increases. Any time there is a shortage, consumers will
"pay" a higher price in terms of time searching. While some of the poor are likely to benefit from rent control, anyone who gets such an apartment gains, and some of those people may not be poor.
Additionally, if there is "key money" or other bribery, other parties such as apartment owners may gain.
NEW QUESTION # 690
A value-weighted index in which a $50 stock increased by 15% and a $45 stock decreased by 17% would
- A. probably change, but that change is impossible to predict with the available information.
- B. decrease.
- C. increase by 1.8%.
Answer: A
Explanation:
A value-weighted index is derived from the market value of the constituent stocks. But it is impossible to derive the market value of the two stocks because the number of shares outstanding of either is not given.
NEW QUESTION # 691
Purchasing factory equipment on credit results in a
- A. debit to an asset account and a credit to a liability account.
- B. debit to an expense account and a credit to a liability account.
- C. debit to a liability account and a credit to an asset account.
Answer: A
Explanation:
This transaction results in an increase to an asset account and an increase to a liability account. Assets are increased with debits and liabilities are increased with credits.
NEW QUESTION # 692
Which of the following could lead to a rise in receivable days as calculated from the financial statements?
- A. Introduction of discounts on early payment
- B. Increase in the selling price of the firm's product
- C. Unexpected, large one-time credit sales at the end of the financial year
Answer: C
Explanation:
All of the other answers reduce receivables days. A key assumption of the receivables days calculation is that sales occur at a fairly constant level. If however, there is any form of sales build-up towards the end of the financial year, then the receivables days can be misleading. A large sale near the end of the year would increase sales and also the ending balance in Accounts Receivable.
NEW QUESTION # 693
As a portfolio manager, you are comparing the yields on investment grade 10-year corporate bonds and the 10-year on-the-run Treasury. You notice that a bond issued by Ink, Inc. has a yield of 7.8% while the Treasury yields 6.02%. Calculate the yield ratio.
- A. 0.78
- B. 1.3
- C. 0.77
Answer: B
Explanation:
The formula is Yield on Bond A / Yield on Bond B.
Bond B is normally the benchmark
Treasury issue. The yield ratio is calculated as 7.80 / 6.02 = 1.3.
NEW QUESTION # 694
A beginning amount of $75,000 is invested in a money market account. At the beginning of each year a withdrawal of $7,073.07 is to be made to pay insurance premiums. The money market account pays an interest rate of 8%. How many withdrawals will this account support?
- A. 0
- B. 1
- C. 2
Answer: B
Explanation:
BGN; PV = -$75,000; PMT = $7,073.07; i = 8%; CPT n = 20
NEW QUESTION # 695
Vickery, a trustee for the pension plan of Richardson Industries, has just received a commission schedule from XYZ Brokerage, a firm with which he is not currently trading. The fee schedule is lower than that charged by ABC Brokerage, the firm Vickery now uses for most transactions. ABC also provides research data and performance measurement for the pension plan, services which XYZ is not equipped to handle. Vickery is concerned that he may be violating his fiduciary duty of loyalty by not using the lowest cost brokerage firm. Which one of the following statements is true?
- A. Vickery will not violate his fiduciary duty unless he personally profits from his relationship with ABC
- B. Vickery can continue to trade through ABC if he determines, in good faith, that the value of the services are commensurate with the cost.
- C. Vickery will violate his fiduciary duty unless he immediately transfers his entire business to XYZ.
Answer: B
NEW QUESTION # 696
What is the annual Internal Rate of Return of this series of annual cash flows:
Year 0: $6,000>,
Year 1: $4,000,
Year 2: $3,000,
Year 3: $2,000,
Year 4: $1,000
(Note that the is used to indicate a negative number).
- A. 33.74%.
- B. 31.38%.
- C. 24.61%.
Answer: B
Explanation:
On the BAII Plus, press CF 2nd CLRWork 6000 ENTER DownArrow 4000 ENTER
DownArrow DownArrow 3000 ENTER DownArrow DownArrow 2000 ENTER DownArrow DownArrow
1 000 ENTER DownArrow DownArrow 2nd Quit. Then press Irr CPT.
On the HP12C, press these keys: 6000 CHS BlueShift CFo 4000 BlueShift CFj 3000 BlueShift CFj 2000
BlueShift CFj 1000 BlueShift CFj. Then press YellowShift Irr. The "DownArrow" represents the downward-pointing arrow on the top row of the BAII Plus keyboard. Make sure that the BAII Plus has the
P/Y value set to 1.
NEW QUESTION # 697
Which of the following is an example of price discrimination?
- A. insurance companies charge more to insure an expensive car than a cheap one
- B. the grocery store has a "buy one, get one free" sale on eggs
- C. the local department store has special sale prices that are only good from 8 a.m. to 11 a.m.
Answer: C
Explanation:
Only the early morning sale is a price discrimination scheme. Meals cost more in cities because firm costs are higher. It costs more to insure a large car because the company's liability is higher, and the egg sale is available to everyone.
NEW QUESTION # 698
Abbey Company issued $1,000,000 of 10-year bonds with a contractual interest rate of LIBOR + 2%.
The interest rate is to be reset annually. Bondholders will receive interest annually. The LIBOR for the year 2000 is 5.5%. The entry to record interest expense for the year 2000 is
- A. Interest expense (debit) 75,000; Accrued interest payable (credit) 75,000
- B. Interest expense (debit) 75,000; Discount on bonds payable (credit) 20,000; Accrued interest payable
(credit) 55,000 - C. Interest expense (debit) 55,000; Discount on bonds payable (debit) 20,000; Accrued interest payable
(credit) 75,000
Answer: A
Explanation:
Floating rate debt is almost always issued at par, so there is no premium or discount to be amortized. Interest expense is debited for $75,000 which is the face value of $1 million * the interest rate of 7.5% (the LIBOR of 5.5% plus 2%).
NEW QUESTION # 699
The following dataset shows the change of a consumption basket over time:
2 010 (price/quantity)- Bread: $0.77/50; Milk: $1.22/30. 2011 (price/quantity)- Bread: $0.80/52; Milk:
$ 1.24/28. The denominator of the Paasche index should be calculated as:
- A. $0.77 x 52 + 1.22 x 28.
- B. $0.77 x 50 + 1.22 x 30.
- C. $0.80 x 52 + 1.24 x 28.
Answer: A
Explanation:
A is the denominator of the Laspeyres index, and B is the numerator of both.
NEW QUESTION # 700
A lease contains a guaranteed residual value (guaranteed by the lessee). How would this amount be treated in determining the amount the lessee capitalizes?
- A. The present value of the amount would be deducted.
- B. The amount would be deducted.
- C. The present value of the amount would be added.
Answer: C
Explanation:
The present value of guaranteed amounts should be included in the amount capitalized.
NEW QUESTION # 701
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