CFA Institute CFA-LEVEL-1 Online Practice Questions and Exam Preparation

CFA Institute CFA-LEVEL-1 Online Questions & Answers

• Question 1111:

  You have a 3-year investment horizon. You can buy a 10% semi annual coupon, 10 year bond for $1,000. You estimate you can reinvest the coupons at 12% and sell the bond in 3 years time for $1,050. Based on this information, what is your horizon return?

  A. 9.5%
  B. 10.0%
  C. 11.5%
  D. 13. 5%
  C. 11.5%

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  Explanation

  1.Find the FV of the coupons and interest on interest: n = 3(2)=6; i = 12/2 = 6; PMT = 50; compute FV =348.77

  2. Determine the value of the bond at the end of 3 years: given = 1,050.00 1,398.77

  3. Equate FV (1398.77) with PV (1000) over 3 years (n=6); compute i = 5. 75(2) = 11.5%

• Question 1112:

  An unanticipated decrease in short-run aggregate supply will lead to a

  A. higher price level and a lower real interest rate.
  B. lower price level and a lower real interest rate.
  C. lower price level and a higher real interest rate.
  D. higher price level and a higher real interest rate.
  D. higher price level and a higher real interest rate.

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  Explanation

  An unanticipated reduction in short run aggregate supply will cause the price level to rise as the short run aggregate supply curve shifts left. Since people will believe that their lower incomes are temporary, households will reduce their current saving level to maintain current consumption at a level more consistent with their longer term perceived opportunities. This reduction in the supply of loanable funds causes the interest rate to increase.

• Question 1113:

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

  A. model
  B. portfolio
  C. asset-only
  D. cash
  E. performance
  C. asset-only

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  Explanation

  To be in compliance with the PPS, a firm creating a composite must meet this requirement.

• Question 1114:

  ________ should be analyzed before individual industries and companies to determine whether the economic and market outlook indicates an underweighting of asset classes.

  A. Historical trends
  B. Security markets
  C. Economies and security markets
  D. Economies
  C. Economies and security markets

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  Explanation

  Economies and security markets should be analyzed before individual industries and companies to determine whether the economic and market outlook indicates an underweighting of asset classes.

• Question 1115:

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

  A. percent of accounts receivable
  B. neither of these answers are correct
  C. both of these answers are correct
  D. aging
  C. both of these answers are correct

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  Explanation

  The aging and percent of Accounts Receivable methods calculate what the balance of the allowance account should be, however, percent of net sales method calculates the actual expense for the period.

• Question 1116:

  Access or covered persons are discussed in detail under which of the following standards?

  A. Prohibition against Plagiarism
  B. Responsibilities of Supervisors
  C. None of these answers
  D. Priority of Transactions
  E. Fundamental Responsibilities
  F. Professional Misconduct
  G. Disclosure of Conflicts to Employer
  H. Professional Misconduct
  D. Priority of Transactions

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  Explanation

  Access or covered persons are dealt with under the compliance procedures of Standard IV (B.4), Priority of Transactions.

• Question 1117:

  What monthly payment would repay a $28,500 car loan over 60 months, assuming your loan has an interest rate of 3. 9% per year, compounded monthly?

  A. $492. 29
  B. $764. 58
  C. $423. 75
  D. $550.58
  E. $523. 59
  E. $523. 59

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  Explanation

  On the BAII Plus, press 60 N, 3. 9 divide 12 = I/Y, 28500 PV, 0 FV, CPT PMT. On the HP12C, press 60 n, 3. 9 ENTER 12 divide i, 28500 PV, 0 FV, PMT. Note that the answer will be displayed as a negative number. Make sure the BAII Plus has the value of P/Y set to 1.

• Question 1118:

  Standard III (E) is ________.

  A. Obligation to Inform Employer of Code and Standards
  B. Duty to Employer
  C. Responsibilities of Supervisors
  D. Disclosure of Conflicts to Employer
  E. None of these answers
  F. Disclosure of Additional Compensation Arrangements
  C. Responsibilities of Supervisors

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  Explanation

  Standard III (A) deals with the Obligation to Inform Employer of Code and Standards. Standard III (B) deals with the Duty to Employer. Standard III (C) deals with Disclosure of Conflicts to Employer. Standard III (D) deals with Disclosure of Additional Compensation Arrangements. Standard III (E) deals with Responsibilities of Supervisors.

• Question 1119:

  "Prohibited transactions" are discussed in Standard IV (B.4), Priority of Transactions. Which of the following is NOT suggested as a firm policy?

  A. None of these answers.
  B. Participation by investment personnel in equity should be restricted.
  C. Firms must determine specific requirements relating to blackout period.
  D. All individuals who are involved in the investment decision-making process should be subject to the same restricted period.
  A. None of these answers.

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  Explanation

  Under the compliance procedures for Standard IV (B.4), members and their firms should clearly define prohibited transactions so that employees completely understand their obligations to clients and their employer. Participation by investment personnel in equity or equity-based IPOs should be restricted. Also, firm procedures should prevent managers or employees from initiating trades in a security for which their firms have a pending buy or sell order within a 24-hour period. Firms must determine specific requirements relating to such blackout periods. All individuals who are involved in the investment decisionmaking process should be subject to the same restricted period.

• Question 1120:

  What deposit would you need to make today in order to withdraw $100 a month for the next 5 years, beginning next month, if the deposit will accrue interest at 8% per year, compounded monthly?

  A. $5,141.23
  B. $492. 59
  C. $1,237. 66
  D. $399.27
  E. $4,931.84
  E. $4,931.84

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  Explanation

  On the BAII Plus, press 60 N, 8 divide 12 = I/Y, 100 PMT, 0 FV, CPT PV. On the HP12C, press 60 n, 8 ENTER 12 divide i, 100 PMT, 0 FV, PV. The answer will be displayed as a negative number. Make sure the BAII Plus has the value of P/Y set to 1.