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

CFA Institute CFA-LEVEL-1 Online Questions & Answers

• Question 1341:

  A critical part of Standard IV (A.2) is to distinguish between:

  A. buy side and sell side.
  B. industry and company analysis.
  C. insider trading and appropriate trading.
  D. research reports and investment memoranda.
  E. employees and independent contractors.
  F. CFA charterholders and non-CFA charterholders.
  G. none of these answers.
  G. none of these answers.

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  Explanation

  Standard IV (A.2) - Research Reports states the responsibility of AIMR members, CFA charterholders and candidates to include in each research report those key facts that are instrumental to the investment recommendation presented in the report. A critical part of this requirement is to distinguish clearly between opinions and facts.

• Question 1342:

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

  A. proxy voting
  B. none of these answers
  C. return objectives
  D. time horizon
  E. liquidity needs
  F. investable funds
  C. return objectives

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  Explanation

  Return objectives are considered under "investor objectives." Liquidity needs, time horizon and proxy voting are considered under "investor constraints."

• Question 1343:

  Four of your firm's analysts have been chosen as finalists for the Wealth Magazine All-Star Analysts team. They will get different bonuses depending on the order in which they finish among themselves. How many different ways could they finish?

  A. 10.
  B. 24.
  C. 16.
  D. 36.
  B. 24.

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  Explanation

  The factorial method allows you to determine the number of ways of arranging n things. Initially, there are n choices for the first item, then n-1 for the second, and so on. The number of combinations is therefore n! = n * (n-1) * (n-2) * (n-3) * ...

  * (1). Here, we wish to find out how many different orders can be made with 4 persons. The answer is 4! = 4 * 3 * 2 * 1 = 24.

• Question 1344:

  A linear regression is ________ relationship.

  A. a causal
  B. an acausal
  C. a functional
  D. none of these answers
  C. a functional

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  Explanation

  It is important to remember that a regression equation does not imply a causal relationship between the dependent and the independent variables. It simply postulates a functional i.e. an associative relationship between them.

• Question 1345:

  What is the annual Internal Rate of Return of this series of annual cash flows: Year 0: <$14,000>, Year 1: $5,000, Year 2: $4,000, Year 3: $5,000, Year 4 a negative number).

  A. 10.69%
  B. 11.14%
  C. 12. 04%
  D. 45. 29%
  E. 10.49%
  B. 11.14%

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  Explanation

  On the BAII Plus, press CF 2nd CLRWork 14000 +/- ENTER DownArrow 5000 ENTER DownArrow DownArrow 4000 ENTER DownArrow DownArrow 5000 ENTER DownArrow DownArrow 4000 ENTER DownArrow DownArrow 2nd Quit.

  Then press Irr CPT. On the HP12C, press these keys: 14000 CHSBlueShift CFo 5000 BlueShift CFj 4000 BlueShift CFj 5000 BlueShift CFj 4000 BlueShift CFj. Then press YellowShift Irr. The "DownArrow" represents the downward-pointing

  arrow on the top

  row of the BAII Plus keyboard. Make sure the BAII Plus has the value of P/Y set to 1.

• Question 1346:

  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. 0.20
  B. 1.00
  C. 0.25
  D. 0.50
  E. None of these answers
  A. 0.20

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  Explanation

  8% + 15% - 3% = 20%

• Question 1347:

  What is the area under the normal curve between z = 1.0 and z = 2. 0?

  A. 1.0000
  B. 0.1359
  C. None of these answers
  D. 0.7408
  E. 0.4772
  B. 0.1359

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  Explanation

  From the z-tables, z = 1 is 0.3413 and z = 2 is 0.4772. So the area in between is 0.4772 - 0.3413 = 0.1359.

• Question 1348:

  ________ invest a pool of funds belonging to many individuals in a portfolio of individual investments such as stocks and bonds.

  A. Public-listed companies
  B. Partnerships
  C. Stock exchanges
  D. Investment companies
  D. Investment companies

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  Explanation

  Investment companies create a portfolio of individual market instruments such as stocks and bonds and market the shares of this portfolio to the individual investor.

• Question 1349:

  Which of the following is/are true about corporate pension plans?

  I. The plan manager owes a fiduciary duty to the plan sponsor.

  II. The plan manager is held to the "Prudent Man Rule."

  III.

  The plan manager is restricted by a legal list of statutes which limit investments to a specified set of securities.

  A. II and III only
  B. II only
  C. none of them
  D. I and II only
  C. none of them

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  Explanation

  Corporate pension plan managers are governed by ERISA (Employee Retirement Security Act, 1974). Under this, fiduciaries are held to the "Prudent Expert Rule" and are expected to conduct investments using appropriate analysis and expertise. They owe fiduciary loyalty solely to the plan beneficiaries and not to the plan sponsor or any other party whom may be involved. ERISA allows the plan manager to consider investments in a portfolio context rather than on an individual basis. Thus, it provides far more latitude and is much more sensible than the old rules that relied on legal lists of securities for investments. Standard IV (B.1) - Fiduciary Duties - and the Topical Study "Fiduciary Duty."

• Question 1350:

  Which of the following is an advantage of technical analysis?

  A. It explains why investors are buying and selling.
  B. It involves adjusting for accounting problems.
  C. It only incorporates economic reasoning.
  D. It is quick and easy.
  D. It is quick and easy.

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  Explanation

  Technical Analysis is viewed as less vigorous than fundamental analysis.