CFA Institute CFA Institute Certifications CFA-LEVEL-1 Questions & Answers

• Question 3451:

  Theta Corp.'s stock is expected to appreciate 6% per year. If no dividends are paid out over the next 5 year and the current stock price is $28, what's the expected price in 5 years?

  A. $39.6

  B. $37.5

  C. $41.2

  D. $34.9

  Correct Answer: B

  The expected price in 5 years is 28*(1.06^5) = 37.5

• Question 3452:

  The lowest significance level at which the null hypothesis can be rejected is called the:

  A. F-statistic of the test.

  B. t-value of the test.

  C. p-value of the test.

  D. critical value of the test.

  E. none of these answers.

  Correct Answer: C

  The lowest significance level at which the null hypothesis can be rejected is called the p-value of the test. Thus, if the p-value is less than the significance level, the null hypothesis can be rejected at that significance level.

• Question 3453:

  The sponsors of a well-known charity came up with a unique idea to attract wealthy patrons to the $500 a plate dinner. After the dinner, it was announced that each patron attending could buy a set of 20 tickets for the gaming tables. The chance of winning a prize for each of the 20 plays is 50-50. If you bought a set of 20 tickets, what is the chance that you will win 15 or more prizes?

  A. 0.021

  B. 0.250

  C. 0.006

  D. None of these answers

  E. 0.750

  Correct Answer: A

  This is a binomial probability. The probability of getting r successes out of n trials where the probability of success each trial is p and probability of failure each trial is q (where q = 1-p) is given by: n!(p^r)[q^(n-r)]/r! (n-r)!. Here n = 20, p = 0.5 and q = 0.5 and r = 15,16,17,18,19,20. Therefore we have P(15) = 20!(0.5^15)(0.5^5)/15!5! = 0.0148 P(16) = 20!(0.5^16)(0.5^4)/16!4! = 0.0046 P(17) = 20!(0.5^17)(0.5^3)/17!3! = 0.0011 P(18) = 20!(0.5^18)(0.5^2)/18!2! = 0.0002 P(19) = 20!(0.5^19)(0.5^1)/19!1! = 0.00002 P(20) = 20!(0.5^20)(0.5^0)/20!0! = 0.000001 The sum adds up to 0.207.

• Question 3454:

  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

  Correct Answer: B

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

• Question 3455:

  At a local burger joint, 3 workers receive $5.3 per hour, 4 workers receive $4.9 per hour and 2 workers receive $8.1 per hour. The average pay of a worker at the joint is ________.

  A. $5.18

  B. none of these answers

  C. $5.74

  D. $6.10

  Correct Answer: C

  There are 3 + 4 + 2 = 9 workers. The total wages paid equal 3*5.3 + 4*4.9 + 2*8.1 = $51.7. The average pay equals 51.7/9 = $5.74

• Question 3456:

  Which of the following measures of dispersion are based on deviations from the mean?

  A. None of these answers

  B. Standard deviation

  C. Mean deviation

  D. All of these answers

  E. Variance

  Correct Answer: D

  The formulas for all three measures are based on the deviation of the mean. Note: variance is the standard deviation squared.

• Question 3457:

  What semiannual deposit is needed to accumulate $8,000 in 5 years if the account pays 7% per year, compounded semiannually, assuming that the first deposit is made in 6 months and also assuming that the account already has $1,250 in it today?

  A. $336.15

  B. $677.44

  C. $559.52

  D. $278.01

  E. $531.63

  Correct Answer: E

  On the BAII Plus, press 10 N, 7 divide 2 = I/Y, 1250 PV, 8000 +/- FV, CPT PMT. On the HP12C, press 10 n, 7 ENTER 2 divide i, 1250 PV, 8000 CHS FV, PMT. Note that the answer this time is a positive number. This means that the $531.63 is a deposit in addition to the $1,250 original deposit. The $5,000 is entered as a negative number, because the $1,250 and the $531.63 are deposits and the $8,000 is a withdrawal. Make sure the BAII Plus has the value of P/Y set to 1.

• Question 3458:

  A variable, W, is normally distributed with a mean of 12. 68% of its observations lie between 8 and 16. The coefficient of variation of W is ________.

  A. 0.66

  B. 1.5

  C. 3.0

  D. 0.33

  Correct Answer: D

  For a normal distribution, 68% of the observations lie within one standard deviation of the mean. Hence, the standard deviation of X equals 12-8 = 4. The coefficient of variation is then equal to standard deviation/ mean = 4/12 = 0.33.

• Question 3459:

  If you buy an item and pay for it with 48 monthly payments of $75, beginning next month, what was the cash price today, if interest accrues at 13% per year, compounded monthly?

  A. $575.29

  B. $44.71

  C. $2,795.64

  D. $2,904.12

  E. $2,598.42

  Correct Answer: C

  The cash price would be the present value of the payments made using the specified interest rate. On the BAII Plus, press 48 N, 13 divide 12 = I/Y, 75 PMT, 0 FV, CPT PV. On the HP12C, press 48 n, 13 ENTER 12 divide i, 75 PMT, 0 FV, PV. Note that the answer will be shown as a negative number. Make sure the BAII Plus has the P/Y value set to 1.

• Question 3460:

  How much must you deposit today in order to withdraw $500 in 1 year, $700 in 3 years and $500 in 4 years, assuming your money earns 6.5% per year, compounded annually?

  A. $1,200.00

  B. $1,503.27

  C. $1,240.80

  D. $1,421.95

  E. $1,437.64

  Correct Answer: E

  Solve this question by working 3 compound interest problems. On the BAII Plus, press 1 N, 6.5 I/Y, 0 PMT, 500 FV, CPT PV, which yields $469.48. Then press STO 1. Then press 3 N, 700 FV, CPT PV, which yields $579.49. Then press + RCL 1 = STO 1. Then press 4 N, 500 FV, CPT PV, which yields $388.66. Then press + RCL 1 = to see the answer. On the HP12C, press 1 n, 6.5 i, 0 PMT, 500 FV, PV. Then press STO

  1. Then press 3 N, 700 FV, PV. Then press RCL 1 + STO 1. Then press 4 n, 500 FV, PV. Then press RCL 1 + to see the answer. Note that the answer will be displayed as a negative number. Make sure the BAII Plus has the P/Y value set to 1.