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

CFA Institute CFA-LEVEL-1 Online Questions & Answers

• Question 2941:

  What monthly payment, beginning next month, is required over the next 60 months to pay off a $10,000 debt today, if interest is charged at 14% per year, compounded monthly?

  A. $116. 02
  B. $166. 67
  C. $2070.54
  D. $1,400.54
  E. $232. 68
  E. $232. 68

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  Explanation

  On the BAII Plus, press 60 N, 14 divide 12 = I/Y, 10000 PV, 0 FV, CPT PMT. On the HP12C, press 60 n, 14 ENTER 12 divide i, 10000 PV, 0 FV, PMT. Make sure the BAII Plus has the P/Y value set to 1.

• Question 2942:

  Performance Presentation Standards require the disclosure of whether composite returns on international investments are ________ of foreign withholding taxes.

  A. net
  B. gross
  C. none of these answers
  D. net or gross
  D. net or gross

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  Explanation

  The performance presentation must disclose whether composites and benchmarks are presented gross or net of withholding taxes on dividends, interest and capital gains; if net, the assumed tax rate for both the composite and the benchmark.

• Question 2943:

  You are going to hold a stock for an infinite amount of time. The current dividend is $1 per share and is expected to grow at 15% a year. Your long run required return is 20%. Using the infinite period dividend discount model calculate the value of the stock.

  A. none of these answers
  B. $23. 00
  C. $25. 60
  D. $26. 45
  B. $23. 00

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  Explanation

  g = .15 k = .20 Dividend = 1.15 x $1.00 = $1.15 V = 1.15/(.20 - .15) = $23.

• Question 2944:

  The trough is

  A. the bottom price.
  B. a trend indicating declining prices.
  C. a trend indicating rising prices.
  D. a period of low-volume trading.
  E. the peak price.
  A. the bottom price.

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  Explanation

  Technical analysts would purchase a stock if they think that it has hit its trough, and is now in a rising trend channel.

• Question 2945:

  Sara Jones, CFA, recently purchased a U.S. government security that was issued on 6/1/2007 and will mature on 6/1/2014. Jones purchased the security in the secondary market. This security is most likely an: A. on-the-run Treasury note

  

  B. off-the-run Treasury bond

  C. off-the-run Treasury note

  Correct Answer. C
  C

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  Explanation

• Question 2946:

  Which of the following items is deducted from net income to arrive at cash flow from operations when using the indirect method?

  A. depreciation expense
  B. decrease in accounts receivable
  C. decrease in accounts payable
  D. amortization expense
  C. decrease in accounts payable

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  Explanation

  A decrease in accounts payable is an outflow.

• Question 2947:

  The net asset value (NAV) of this fund would be:

  

  A. $17. 30.
  B. $26. 00.
  C. $23. 12.
  D. $15. 80.
  A. $17. 30.

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  Explanation

  (Total Market Value/Total Number of Shares)=(432,400/25,000)=17. 296=17. 30

• Question 2948:

  Which of the following is not an advantage of technical analysis?

  A. Technical analysis is not as time-consuming as fundamental analysis.
  B. All of these answers are advantages.
  C. Technical analysis assumes that securities prices move in trends, and identifying changes in these trends can lead to the discovery of superior investment opportunities more closely to their price moves than fundamental analysis.
  D. Technical analysis is not heavily dependent on financial statements.
  B. All of these answers are advantages.

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  Explanation

  All of these reasons are cited by technical analysts as advantages of their method. One of the major advantages cited by technical analysts is the fact that technical analysis is not heavily dependent on financial statements. Technical analysts, as a community, are suspicious of financial statements, and believe that few fundamental analysts can identify relevant information in financial statements, and analyze the impact of this information on securities prices in time for superior investment returns to be realized.

  Additionally, technical analysts believe that securities markets "price in" material information gradually, and that securities prices move in identifiable trends and patterns. An astute technical analyst, it is argued, can identify superior investment opportunities by recognizing the implicit trends exhibited by securities prices and quantifiable past performance data. Assuming that fundamental analysis can identify whether a security is over or under-valued long before the security experiences a significant price realization, the fundamental analyst is left with the daunting decision of when to buy of sell. Ideally, the fundamental analyst would like to invest his money immediately before a security experiences a profitable increase (or, for short sellers, a profitable decrease) in price, preferring to hold the funds to invest in other opportunities until the change in price direction is initiated. Technical analysts argue that because they do not invest until the move to the new "equilibrium price" is underway, they are more likely to experience ideal timing compared to the fundamental analyst.

• Question 2949:

  If you already have $500 in a savings account, how much must you deposit 4 years from now in order to have $5,000 in 8 years, assuming the account earns interest at 10% per year, compounded annually?

  A. $4,500.00
  B. $732. 05
  C. $2,683. 02
  D. $3,415. 07
  E. $2,332. 54
  C. $2,683. 02

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  Explanation

  The way to approach this question is to find the PV today of the $5,000 amount, determine the difference between this PV and the existing $500 amount in the account, and then move this difference out to the 4 year from now point. On the BAII Plus, press 8 N, 10 I/Y, 0 PMT, 5000 FV, CPT PV. Then press + 500 =. Then press PV, 4 N, CPT FV to see the answer. On the HP12C, press 8 n, 10 i, 0 PMT, 5000 FV, PV. Then press 500 +. Then press PV, 4 n, FV to see the answer. Make sure the BAII Plus has the P/Y value set to 1.

• Question 2950:

  You are examining a group of 20 mutual funds. You find that 10 have a 5% cash position, 4 have a 10% cash position, and 6 have a 2% cash position. What is the weighted average cash position of these 20 mutual funds?

  A. 4. 80%.
  B. 5. 10%.
  C. 5. 00%.
  D. 4. 90%.
  B. 5. 10%.

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  Explanation

  A weighted-average is equal to the sum (as i goes from 1 to n) of w_i * X_i, where w_i is the percentage weight of the ith item, and X_i is the value of the ith item. Here, we get a weighted mean of 10/20 * 0.05 + 4/20 * 0.10 + 6/20 * 0.02 = 5. 10%.