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

CFA Institute CFA-LEVEL-1 Online Questions & Answers

• Question 1821:

  Which of the following is/are discrete random variables? I. The height of a student selected at random from 217 students. II. The slot number where the ball comes to rest in a roulette wheel. III. The color of a playing card drawn at random from a pack. IV. The speed of a car tracked by the radar gun of highway patrol.

  A. IV only
  B. II and III
  C. I, II and IV.
  D. II only
  E. III only
  F. I, II and III
  G. I only
  H. I and II
  B. II and III

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  Explanation

  A student's height and the speed of a car can take values over a continuum and hence, are not discrete variables.

• Question 1822:

  Which of the following are practical difficulties associated with capital structure and degree of leverage analyses?

  A. All of these statements are correct.
  B. None of the statements represent a serious impediment to the practical application of leverage analysis in capital structure determination.
  C. Managers' attitudes toward risk differ and some managers may set a target capital structure other than the one that would maximize stock price.
  D. Managers often have a responsibility to provide continuous service; they must preserve the long-run viability of the enterprise. Thus, the goal of employing leverage to maximize short-run stock price and minimize capital cost may conflict with long-run viability.
  E. It is nearly impossible to determine exactly how P/E ratios or equity capitalization rates are affected by different degrees of financial leverage.
  A. All of these statements are correct.

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  Explanation

  Two projects being considered are mutually exclusive and have the following projected cash flows: Year Project AProject B 0-$50,000-$50,000 115,6250 215,6250 315,6250 415,6250 515,62599,500

• Question 1823:

  Which of the following is/are true?

  I. Assets = Equity + Liabilities

  II. Equity = Retained earnings + Dividends Payable

  III. Assets + Liabilities = Equity

  IV.

  Assets = Liabilities - Equity

  A. II and IV
  B. I only
  C. I and II
  D. III only
  B. I only

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  Explanation

  The basic accounting equation states that Assets = Liabilities + Owners' Equity.

• Question 1824:

  What annual interest rate, compounded annually, would cause a series of 10 deposits of $500 to accumulate to $9,000, if the first deposit is made one year from today?

  A. 12. 52%
  B. 15. 38%
  C. 11.12%
  D. 8.04%
  E. 10.09%
  A. 12. 52%

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  Explanation

  On the BAII Plus, press 10 N, 0 PV, 500 PMT, 9000 +/- FV, CPT I/Y. On the HP12C, press 10 n, 0 PV, 500 PMT, 9000 CHS FV, i. Make sure the BAII Plus has the P/Y value set to 1.

• Question 1825:

  Performance results for a portfolio need to be presented with cash, ________ equivalents, or substitute assets.

  A. composite
  B. multiple
  C. cash
  D. average
  C. cash

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  Explanation

  Returns from cash and cash equivalents held in portfolios must be included in return calculations and the cash and cash equivalents must be included in the portfolio amount (total assets) on which the return is calculated.

• Question 1826:

  The investment community's need for a common, accepted set of guidelines to promote fair representation and full disclosure in every firm's presentation performance results to clients and prospective clients has guided the development of the

  A. AIMR Standards for Calculation of Returns
  B. AIMR Standards of Practice
  C. AIMR Performance Presentation Standards
  D. AIMR Performance and Calculation Investment Board
  C. AIMR Performance Presentation Standards

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  Explanation

  The Performance Presentation are the manifestation of a set of guiding ethical principles and should be interpreted as minimum standards for presenting investment performance.

• Question 1827:

  If all the 10,000 data points in a regression lie exactly on a straight line, which of the following is/are true?

  I. The intercept term is zero.

  II. The percentage of unexplained variance equals zero

  III. The slope coefficient is positive.

  IV.

  The correlation coefficient between the dependent and independent variables is 1. A.

  III only

  B.

  IV only

  C.

  II and IV

  D.

  III and IV

  E.

  II only

  F.

  I only

  Correct Answer. E
  E

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  Explanation

  Since there is no error in the regression, the percentage of unexplained variance will be zero. The intercept and slope terms can be any real numbers and the correlation coefficient will be either + 1 or - 1.

• Question 1828:

  Martina Profis runs a fixed-income portfolio for the pension fund of Whether by Whittaker, Ltd. The portfolio contains a $12 million position in the corporate bonds of Dewey Treadmills. Profis is concerned that interest rates are likely to rise and has calculated that a 50-basis point increase in rates would cause a 4% decline in the Dewey bonds. The dollar duration of the position in Dewey Treadmills is closest to:

  A. $96,000
  B. $480,000
  C. $960,000.
  C. $960,000.

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  Explanation

• Question 1829:

  Which of the following actions will enable a company to raise additional equity capital (that is, which of the following will raise the total book value of equity)?

  A. A stock repurchase.
  B. The establishment of a new-stock dividend reinvestment plan.
  C. A stock split.
  D. All of these answers are correct.
  E. The establishment of an open-market purchase dividend reinvestment plan.
  B. The establishment of a new-stock dividend reinvestment plan.

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  Explanation

  The new stock type of dividend reinvestment plan invests the dividends in newly issued stock, hence these plans raise new capital for the firm.

• Question 1830:

  Which of the following describes a change in reporting entity?

  A. A company acquires a subsidiary that is to be accounted for as a purchase.
  B. None of these answers.
  C. A business combination is made using the pooling-of-interests method.
  D. A manufacturing company expands its market from regional to nationwide.
  E. A company acquires additional shares of an investee and changes from the equity method of accounting to consolidation of the subsidiary.
  C. A business combination is made using the pooling-of-interests method.

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  Explanation

  A change in reporting entity can occur in the following ways: initial publication of consolidated financial statements; change in consolidation policy regarding subsidiaries; and pooling of interests.