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

CFA Institute CFA-LEVEL-1 Online Questions & Answers

• Question 2041:

  A researcher has a sample of 400 observations from a population whose standard deviation is known to be 136. The mean of the sample is calculated to be 17. 2. The null hypothesis is stated as Ho: mean = 4. The p-value under the alternative hypothesis H1: mean > 4 equals ________.

  A. 3. 92%
  B. 5. 2%
  C. 1.96%
  D. 2. 6%
  D. 2. 6%

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  Explanation

  The z-statistic under the null is calculated to be (17. 2 - 4)/(136/(400^.5)) = 1.94. The right-tailed probability of observing a z-statistic at least as big as 1.94 equals 1.0 - 0.9738 = 0.026 = 2. 6%. This is the p-value of the right-tailed test in this sample.

• Question 2042:

  Standard IV (B.6) deals with ________.

  A. Preservation of Confidentiality
  B. Prohibition against Use of Material Nonpublic Information
  C. None of these answers
  D. Disclosure of Referral Fees
  E. Priority of Transactions
  F. Disclosure of Conflicts to Clients and Prospects
  G. Prohibition against Misrepresentation
  H. Performance Presentation
  G. Prohibition against Misrepresentation

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  Explanation

  Standard IV (B.6) prohibits members from making statements that misrepresent the services they are capable of performing, their qualifications and their academic or professional credentials.

• Question 2043:

  At the end of a fiscal period, any revenue that has been earned but not received should be credited to an appropriate

  A. revenue account
  B. asset account
  C. liability account
  D. expense account
  A. revenue account

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  Explanation

  Revenue should be recognized in the period in which it is earned and is credited to the appropriate revenue account.

• Question 2044:

  With regard to calculation of returns for international portfolios, a consistent source of ________ should be used.

  A. exchange rates
  B. settlements
  C. trades
  D. taxes
  E. disclosures
  A. exchange rates

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  Explanation

  Whenever the currency overlay manager is notified of changes in the underlying currency exposures as a result of a shift in the underlying assets, the currency overlay portfolios should be revalued to ensure consistency.

• Question 2045:

  What is the distribution with a mean of 0 and a standard deviation of 1 called?

  A. Binomial probability distribution
  B. None of these answers
  C. Frequency distribution
  D. Z-score
  E. Standard normal distribution
  E. Standard normal distribution

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  Explanation

  These values describe the standard normal distribution.

• Question 2046:

  Standard IV (B.2) deals with ________.

  A. compensation
  B. fair dealing
  C. soft dollars
  D. competition
  E. none of these answers
  F. suitability
  G. proxy voting
  H. disclosure of conflicts
  F. suitability

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  Explanation

  Standard IV (B.2) deals with the appropriateness and suitability of investment recommendations for each portfolio or client.

• Question 2047:

  Morgan Dexter has been asked by his supervisor to present the features of interest rate swaps to a group of newly hired risk managers. In his presentation, Dexter notes that in a plain-vanilla interest rate swap, there is one floating rate-payer and one fixed-rate payer. Dexter points out that the netting arrangements typical to plain vanilla swaps reduce the credit risk for both counter parties Dexter also states that some interest rate swaps may have two floating rate payers. Are Dexter *s statements regarding swaps correct or incorrect?

  A. Only Dexter's statement about reduced credit risk from netting is correct.
  B. Only Dexter's statement about two floating rate payers is correct.
  C. Both statements are correct.
  C. Both statements are correct.

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  Explanation

• Question 2048:

  You are examining a portfolio composed of 33% money-market investments, 9.5% bonds, and 57. 5% stocks. Last year, the return on the money-market investments was 4%; the return on bonds was 9%, and the return on stocks was -11%. What is the contribution of stocks toward the portfolio weighted average return?

  A. -57. 50%.
  B. -11.00%.
  C. -4. 15%.
  D. -6. 325%.
  D. -6. 325%.

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  Explanation

  The portfolio weighted-average mean return is equal to the sum (as i goes from 1 to n) of w_i * X_i, where w_i is the percentage weight in the portfolio of the ith asset, and X_i is the investment return of the ith asset. The contribution of any asset will equal its weight in the portfolio times its return. Here, we get 0.575 * -0.11 = -6. 325%.

• Question 2049:

  If a stock that you are holding for one year has an estimated dividend payout of $1.10 and an expected sale price of $22, what is the value of the stock?

  A. not enough information to calculate it
  B. $22
  C. $23. 10
  D. $20.26
  A. not enough information to calculate it

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  Explanation

  In order to value the stock, a discount rate must be provided.

• Question 2050:

  The following account is affected when recording a return of inventory to the vendor under a perpetual inventory system.

  A. purchase returns and allowances
  B. accounts receivable
  C. cash
  D. merchandise inventory
  D. merchandise inventory

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  Explanation

  When inventory is purchased, Merchandise Inventory is debited, and credited when returned. The periodic system records purchases in an account called Purchases and returns are booked to Purchases Returns and Allowances.