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

CFA Institute CFA-LEVEL-1 Online Questions & Answers

• Question 1291:

  You are examining a group of 6 stocks within an industry. The industry average profit margin is expected to be 30%. For these stocks, the average profit margins have been 50%, 25%, 15%, 5%, 45%, and 30%. What is the mean absolute deviation of profit margins from the industry average?

  A. 13. 3%.
  B. 13. 7%.
  C. 13. 5%.
  D. 13. 0%.
  A. 13. 3%.

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  Explanation

  The mean absolute deviation = the sum of (as i goes from 1 to n) of the absolute value of (X_i - Xbar), divided by n. Here, we have [|50% - 30%| + |25% - 30%| + |15% - 30%| + |5% - 30%| + |45% - 30%| + |30% - 30%|]/6 = 13. 33%

• Question 1292:

  The reason that the translation of foreign subsidiaries will generate discrepancies between the changes in accounts reported on the balance sheet and those reported in the cash flow statement is

  A. the change in the exchange rate does not appear on the balance sheet but will appear as a component of cash collections it is not a change resulting from operations.
  B. the change in the exchange rate appears as part of the balance of accounts receivable on the balance sheet but will not appear as a component of cash collections because it is not a change resulting from operations.
  C. the change in the exchange rate does not appear on the balance sheet but will appear as a component of cash from financing activities.
  D. the change in the exchange rate appears as part of the stockholders' equity on the balance sheet but will not appear as a component of cash collections because it is not a change resulting from operations.
  B. the change in the exchange rate appears as part of the balance of accounts receivable on the balance sheet but will not appear as a component of cash collections because it is not a change resulting from operations.

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  Explanation

  Thus, cash flow from operations does not include the effects of the translation process.

• Question 1293:

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

  A. $277. 44
  B. $436. 15
  C. $359.52
  D. $348.23
  E. $778.01
  D. $348.23

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  Explanation

  On the BAII Plus, press 10 N, 6 divide 2 = I/Y, 750 PV, 5000 +/- FV, CPT PMT. On the HP12C, press 10 n, 6 ENTER 2 divide i, 750 PV, 5000 CHS FV, PMT. Note that the answer this time is a positive number. This means that the $348.23 is a deposit in addition to the $750 original deposit. The $5,000 is entered as a negative number, because the $750 and the $348.23 are deposits and the $5,000 is a withdrawal. Make sure the BAII Plus has the value of P/Y set to 1.

• Question 1294:

  A ________ level is the price range at which the technician would expect a substantial increase in demand for the stock. A ________ level is the price range at which the technician would expect an increase in the supply of the stock to cause any price increase to reverse abruptly.

  A. base; ceiling
  B. support; resistance
  C. sell; buy
  D. bottom; top
  B. support; resistance

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  Explanation

  Increase demand will resist price falls, so when a price falls to a level which triggers strong demand - the price will not fall below this support level. Resistance level is a price range where trade activity in that stock will tend to reverse the price trend - this is usually due to investors having set a target price range for trade execution.

• Question 1295:

  Which of the following figures is not explicitly incorporated into the earnings per share (EPS) calculation?

  A. Variable costs
  B. Common shares outstanding
  C. Interest expense
  D. None of these answers
  E. Fixed costs
  F. Sales
  D. None of these answers

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  Explanation

  The EPS figure can be found using two principal equations. The first is illustrated as follows:

  {EPS = [(Sales - Fixed Costs - Variable Costs - Interest Expense)(1 - Tax Rate)] / [# of Common Shares Outstanding]}

  Additionally, the EPS figure can be found by:

  {EPS = [(EBIT - Interest Expense)(1 - Tax Rate) / # of Common Shares Outstanding]} As you can see, all of the choices listed are expressly incorporated into the EPS calculation.

• Question 1296:

  A stock price approaching its resistance level should

  A. trade at low volume.
  B. trade at high volume.
  C. soon rebound from its decline.
  D. be speeded along in its increase.
  B. trade at high volume.

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  Explanation

  The resistance level is the price range at which technicians expect a substantial increase in the supply of a stock. Technicians believe that after a stock has fallen from some previous higher price level, investors who bought at that higher level will wait for the price to come back up again to unload the stock at their break-even level. The stock must thus approach its resistance level from below, and once it reaches it, the extra selling will result in high volume.

• Question 1297:

  Money market funds

  A. are typically load funds.
  B. attempt to provide significant capital gains.
  C. tend to be illiquid.
  D. invest in short-term securities.
  E. tend to impose a penalty for early withdrawal.
  D. invest in short-term securities.

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  Explanation

  Money market funds attempt to provide current income, liquidity, and principal safety though investing in short-term securities such as T-bills, banker certificates of deposits, and commercial paper. They generally allow holders to write checks against their accounts.

• Question 1298:

  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. More dispersion in the distribution of the incomes compared with the dispersion of their length of service
  B. Dispersions are equal
  C. Dispersions in the two distributions (income and service) cannot be compared using percents
  D. None of these answers
  E. More dispersion in the lengths of service compared with incomes
  E. More dispersion in the lengths of service compared with incomes

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  Explanation

  The CV is the ratio of the standard deviation to the mean, express as a percent. The higher the coefficient, the greater the dispersion.

• Question 1299:

  According to GAAP classification of cash flows, all of the following are investing cash flows except:

  A. purchase of an office building.
  B. gains on asset sales.
  C. dividends received from investments in stocks.
  D. takeovers financed partly with cash.
  C. dividends received from investments in stocks.

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  Explanation

  Dividends received from stock investments are considered operating cash flows while dividends paid on equity are considered financing cash flows.

• Question 1300:

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

  A. based on similar investment strategy or objective.
  B. all of these answers are correct.
  C. based on the date the portfolios were initiated.
  D. based on the individual account manager's clientele.
  A. based on similar investment strategy or objective.

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  Explanation

  For the defined firm, all fee-paying accounts with investment discretion must be included in one or more composites. The account portfolios must be grouped into composites based on similar investment strategy or objective. Compliance cannot be met on a per composite or per product basis but can only be met on a firmwide basis.