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

• Question 3481:

  You are examining a group of 6 companies. Their average profit margins have been 49%, 10%, 5%, 35%, 30%, and 30%. What is the range of profit margins?

  A. 49.0%.

  B. 30.0%.

  C. 44.0%.

  D. 5.0%.

  Correct Answer: C

  The range = the maximum value - the minimum value. Here, we have 49% - 5% = 44%.

• Question 3482:

  If the hypothesized value of a parameter under the null hypothesis lies outside the confidence interval, the null hypothesis:

  A. none of these answers.

  B. cannot be rejected at the corresponding significance level.

  C. should be rejected at the corresponding significance level.

  D. is ill-specified.

  Correct Answer: C

  The confidence interval specifies the range over which the true value of the estimated parameter can lie without rejecting the null hypothesis at the given level of significance.

• Question 3483:

  What sample statistic is used to estimate a population value?

  A. None of these answers

  B. Point estimate

  C. Parameter

  D. Interval estimate

  E. Sampling error

  Correct Answer: B

  The point estimate is the estimate of a particular value in the population.

• Question 3484:

  What is the area under the normal curve for z > 1.79?

  A. None of these answers

  B. 0.4633

  C. 0.0401

  D. 0.9599

  E. 0.0367

  Correct Answer: E

  From the z-tables, z = 1.79 is 0.4633. So 1 - 0.4633*2 = 0.0734. Since it is on each side of the curve, 0.0734/2 = 0.0367.

• Question 3485:

  What does it mean if r = -1.00?

  A. High values of one variable are associated with low values of the other variable

  B. Dependent variable can be perfectly predicted by the independent variable

  C. All of the variation in the dependent variable can be accounted for by the independent variable

  D. Coefficient of nondetermination equals zero

  E. All of these answers are correct

  Correct Answer: E

  All the above are properties or explanations of the coefficient of correlation being equal to -1.0.

• Question 3486:

  Type I error refers to the event that we will:

  A. Accept the alternative when it is true.

  B. none of these answers.

  C. Reject the null when it is true.

  D. Fail to reject the null when it is false.

  E. Reject the alternative when it is true.

  Correct Answer: C

  Remember that the null hypothesis is the one that you maintain to be true unless there is sufficient evidence to prove otherwise. Therefore, the first type of mistake that can happen is that you reject the maintained hypothesis when in fact, it is true. This error is referred to as "Type I" error. On the other hand, you may not have sufficient evidence to disprove the null when in fact, it is false. This failure to appropriately reject the null is referred to as "Type II" error.

• Question 3487:

  The standard normal probability distribution is one which has:

  A. a mean of 0 and any standard deviation

  B. a mean of 0 and a standard deviation of 1

  C. any mean and a standard deviation of 1

  D. a mean of 1 and any standard deviation

  E. none of these answers are correct

  Correct Answer: B

  The standard normal probability distribution has a mean of 0 and std. deviation of 1.

• Question 3488:

  A statistician has framed his hypothesis testing problem as:

  Ho: mean = 100 H1: mean < 100

  Specify the region for the p-statistic which will lead to the rejection of the null at the 80% significance level.

  A. z-statistic < -0.84

  B. z-statistic > +1.19

  C. z-statistic < -1.35 or z-statistic > +1.35

  D. z-statistic < -1.645

  Correct Answer: A

  Since the alternative is directional and to the left, we use a left-tailed test. For this, the critical value at 80% level is -0.84. -0.84 is the value above which 80% of the probability mass of the standard normal distribution lies). The rejection region is then given by z-statistic < -0.84.

• Question 3489:

  If you deposit $100 a month, beginning next month, for 8 years into an account paying 6% per year, compounded monthly, how much is in your account after that last deposit?

  A. $13,678.56

  B. $12,282.85

  C. $9,600.00

  D. $12,097.91

  E. $23,585,957

  Correct Answer: B

  On the BAII Plus, press 96 N, 6 divide 12 = I/Y, 0 PV, 100 PMT, CPT FV. On the HP12C, press 96 n, 6 ENTER 12 divide i, 0 PV, 100 PMT, FV. On the BAII Plus, make sure the value of P/Y is set to 1. Note that the answer is displayed as a negative number.

• Question 3490:

  If you need $25,000 in 10 years, how much must you deposit today, if your money will earn 6% per year, compounded annually?

  A. $25,000

  B. $13,959.87

  C. $2,320.01

  D. $44,771.19

  E. $23,200.08

  Correct Answer: B

  On the BAII Plus, press 10 N, 6 I/Y, 0 PMT, 25000 FV, CPT PV. On the HP12C, press 10 n, 6 i, 0 PMT, 25000 FV, PV. Note that the answer will be shown as a negative number.