Referring to the table above, what is the relative frequency for those salespersons that earn between $1,600 and $1,799?
A. 24% B. 2. 4% C. None of these answers D. 20% E. 2%
D. 20%
Explanation
The sum of all the class frequencies is 120. The relative frequency for the $1600-$1799 class is therefore 24/120 = 20%
Question 362:
Kaylee Sumners, Level 1 CFA candidate, is having difficulty remembering the tests for the three forms of the efficient market hypothesis (EMH). On her first attempt to outline the information from memory, she made numerous mistakes. After reviewing the material, she tries again to summarize the information. This time, three of her four points are correct. Which of her summary points is INCORRECT?
A. Results of trading rule tests, such as filter rules, support the semi-strong form of the EMH. B. The historical performance of professional money managers supports the strong-form of the EMH. C. Early tests of the semi-strong form used the formula:ReturnAbnormal= ReturnActual- RMarket D. The tests for the semi-strong form EMH give mixed results. Time-series tests such as dividend yield and default spread reject the semi-strong form EMH and event studies on stock splits and announcements of accounting changes support it.
A. Results of trading rule tests, such as filter rules, support the semi-strong form of the EMH.
Explanation
Results of trading rule tests, such as filter rules, support the weak form of the EMH.
The other choices are true. Tests show that professional money managers perform no better than a random buy and hold strategy. This supports the strong form EMH contention that stock prices reflect all information- public and private.
(Aside from corporate insiders and specialists, no group has monopolistic access to information that would result in superior returns.)
Question 363:
Amie Minami recently graduated from the University of Rivendell School of Business and is now studying for the Level 1 CFA examination. She thought she would never have to read about Porter's Five Forces again. However, while taking an online review quiz to help her focus her studies, she sees a question on Porter. Luckily, she remembers all the points and correctly identifies that one of the choices is incorrect. Which of the following choices is FALSE?
A. Porter details three strategies that are available to firms in a competitive environment: low-cost, differentiation, and vertical integration. B. Porter's five forces are the first step in identifying and evaluating a firm's specific competitive strategy. C. When the threat of substitution is highest, profit margins will be low, particularly for commodity-like products. D. Suppliers are more powerful if they are more concentrated than the firms in that industry.
A. Porter details three strategies that are available to firms in a competitive environment: low-cost, differentiation, and vertical integration.
Explanation
While vertical integration may be a strategy, Porter identified two strategies that are available to firms in a competitive environment: a low-cost strategy and a differentiation strategy. The other statements are correct.
Question 364:
An EPS amount is always shown for:
A. all of these answers B. income before extraordinary items and the cumulative effect of accounting changes C. income from continuous operations D. cumulative effect of accounting changes
A. all of these answers
Explanation
All of these responses are true.
Question 365:
According to the signaling theory, if a firm issues debt capital to finance a project, the firm's management must consider the project to be ________.
A. none of these answers B. likely to raise the probability of bankruptcy C. very desirable D. not very profitable
C. very desirable
Explanation
According to the signaling theory of capital structure, a firm will try to raise debt capital when the project's returns are deemed very favorable and vice versa. The firm is signaling that the project has sufficient cash flows to pay back the debt.
Question 366:
Which of the following is the formula for the correlation between X and Y?
A. Cov(X,Y)/[(sigma_X)*(sigma_Y)]^2. B. [Cov(X,Y)]^0.5 C. (sigma_X)*(sigma_Y)/Cov(X,Y). D. Cov(X,Y)/[(sigma_X)*(sigma_Y)].
D. Cov(X,Y)/[(sigma_X)*(sigma_Y)].
Explanation
The correlation between two random variables X and Y is Cov(X,Y)/[(sigma_X)*(sigma_Y)].
Question 367:
Earnings multipliers for series of stocks (such as the SandP 400) have been found to be
A. more volatile than the earnings for series of stocks. B. less volatile than earnings for series of stocks. C. stable. D. approximately as volatile as earnings for series of stocks.
A. more volatile than the earnings for series of stocks.
Explanation
The standard deviation of annual changes of the earnings multiplier for the SandP 400 is 28.2, while that for the annual earnings for the SandP 400 is 18.3. To value stock series, one needs to estimate both the earnings multiplier and the earnings. Although some analysts have tended to ignore the earnings multiplier on the assumption that it is stable over time, its high measured variability makes it hard to ignore.
Question 368:
A firm follows LIFO accounting. Its inventory accounts for a period showed the following sequential accounts:
Beginning inventory of 50 units, purchased at $5 50 units purchased at $10 35 units purchased at $9 25 units sold at $15 70 units sold at $12 Tax rate = 40% Beginning LIFO reserve = $300
Then, the net income of the firm using LIFO is ________.
A. $285 B. $210 C. $198 D. $350
B. $210
Explanation
The total revenue equals 25*15 + 70*12 = 1,215, coming from a sale of 95 units. Under LIFO, the goods purchased last are assumed to have been sold first. Therefore, 35 of the sold units have a cost of $9 each, 50 units have a cost of $10 each and the remaining 10 have a cost of $5 each. Therefore, LIFO COGS = 35*9 + 50*10 + 10*5 = $865. Therefore, assuming no other costs, the pre-tax income equals 1,215 - 865 = $350 and the post tax income equals 350*(1-40%) = $210.
Question 369:
The Income Statement:
I. reflects the current operating performance of the firm.
II. indicates whether the firm is healthy and growing or not.
III. explains the changes in assets, liabilities and Equity of the firm.
IV.
is a snapshot of a firm's operations at a given time.
A. I, II, III and IV B. II and III C. I only D. I and IV
C. I only
Explanation
II needs a cash flow statement, in addition. III is not true since the Income statement does not contain all the details which pertain to changes in assets and liabilities. Finally, an income statement shows the performance over a time period and is hence, not a "snapshot" of operations.
Question 370:
Which of the following statements is most correct?
A. One advantage of adopting a residual dividend policy is that it makes it easier for corporations to maintain dividend clienteles. B. None of these answers are correct. C. The clientele effect can explain why firms often change their dividend policies. D. The bird-in-hand theory would predict that companies could decrease their cost of equity financing by raising their dividend payout. E. All of these answers are correct.
D. The bird-in-hand theory would predict that companies could decrease their cost of equity financing by raising their dividend payout.
Explanation
The main conclusion of MM's irrelevance theory is that dividend policy does not affect the required rate of return on equity. Gordon-Lintner disagreed stating that k(s) decreases as the dividend payout is increased because investors are less certain of receiving the capital gains which should result from retaining earnings than they are of receiving dividends. They said that investors value expected dividends more highly than expected capital gains because the dividend yield is less risky than the growth component in the total expected return equation, k(s) = D1/Po + g. MM disagreed and theorized that k(s) is independent of dividend policy, implying that investors are indifferent between dividends and capital gains. MM called the Gordon-Lintner's study the bird-in-the- hand fallacy, because MM thought the riskiness of the firm's cash flows to investors in the long run is determined by the riskiness of the operating cash flows, not by dividend policy.
Nowadays, the certification exams become more and more important and required by more and more
enterprises when applying for a job. But how to prepare for the exam effectively? How to prepare
for the exam in a short time with less efforts? How to get a ideal result and how to find the
most reliable resources? Here on Vcedump.com, you will find all the answers.
Vcedump.com provide not only CFA Institute exam questions,
answers and explanations but also complete assistance on your exam preparation and certification
application. If you are confused on your CFA-LEVEL-1 exam preparations
and CFA Institute certification application, do not hesitate to visit our
Vcedump.com to find your solutions here.