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

CFA Institute CFA-LEVEL-1 Online Questions & Answers

• Question 3691:

  What is the annual Internal Rate of Return of this series of annual cash flows: Year 0: <$20,000>, Year 1: $15,000, Year 2: $5,000, Year 3: $7,500? (Note that the <> are used to indicate a negative number).

  A. 20.49%
  B. 21.17%
  C. 23. 12%
  D. 18.32%
  E. 25. 51%
  B. 21.17%

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  Explanation

  On the BAII Plus, press CF 2nd CLRWork 20000 +/- ENTER DownArrow 15000 ENTER DownArrow DownArrow 5000 ENTER DownArrow DownArrow 7500 ENTER DownArrow DownArrow 2nd Quit. Then press Irr CPT. On the HP12C, press these keys: 20000 CHS BlueShift CFo 15000 BlueShift CFj 5000BlueShift CFj 7500 BlueShift CFj Then press YellowShift Irr. The "DownArrow" represents the downward-pointing arrow on the top row of the BAII Plus keyboard.

• Question 3692:

  What annual deposit would you need to make, beginning in one year, into an account paying 7% per year, compounded annually, in order to have $50,000 in it after 20 years, assuming that the account has nothing in it today?

  A. $1,129.56
  B. $1,219.65
  C. $4,719.65
  D. $1,291.56
  E. $2,191.65
  B. $1,219.65

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  Explanation

  On the BAII Plus, press 20 N, 7 I/Y, 0 PV, 50000 FV, CPT PMT. On the HP12C, press 20 n, 7 i, 0 PV, 50000 FV, PMT. Note that the answer will be displayed as a negative number.

• Question 3693:

  Another name for "access" person is ________.

  A. none of these answers
  B. supervisor
  C. ombudsman
  D. guardian
  E. fiduciary
  F. covered person
  F. covered person

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  Explanation

  Access or covered persons have knowledge of pending or actual investment recommendations or action. The firm's definition of access (covered) person should be broad enough to cover all people with that knowledge.

• Question 3694:

  The best indication of a firm's present and continuing ability to generate favorable cash flows is information about enterprise earnings based on which of the following basis?

  A. Tax accounting.
  B. Cash accounting.
  C. Modified cash accounting.
  D. Accrual accounting.
  E. Modified accrual accounting.
  D. Accrual accounting.

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  Explanation

  Information about an enterprise's earnings based on accrual accounting generally provides a better indication of the firm's present and continuing ability to generate favorable cash flows than would information limited to the financial effects of cash receipts and payments.

• Question 3695:

  There are two stocks in an index:

  Nothing has changed except now the price of Company A's stock is selling for $4 per share. What is the price-weighted index and what is the value-weighted index?

  A. Price-weighted = 8; Value-weighted =2. 00
  B. Price-weighted = 10; Value-weighted = 1.25
  C. Price-weighted = 7; Value-weighted = 1.50
  D. Price-weighted = 6; Value-weighted = 0.95
  C. Price-weighted = 7; Value-weighted = 1.50

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  Explanation

  Price weight = [(4) + (10)] / 2 = 7

• Question 3696:

  An investment advisor with Churn Brothers Brokerage states that he uses the "bottom up" approach to identify promising investment opportunities. When this investment advisor is evaluating an investment using the bottom up approach, he would begin by doing which of the following?

  A. Examining individual securities and companies.
  B. None of these answers is correct.
  C. Analyzing alternative economies and security markets.
  D. Analyzing the macroeconomic environment.
  E. Examining alternative industries.
  F. More than one of these answers is correct.
  A. Examining individual securities and companies.

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  Explanation

  The bottom up approach begins with an examination of individual securities and companies. Individuals who advocate the bottom up approach believe that it is possible to identify lucrative investment opportunities within various sectors despite macroeconomic and industry influences. In the field of security analysis, there is commonly a confluence of the bottom up approach with "technical analysis,"an approach that is based on the belief that it is possible to predict securities prices by using historical data. The bottom up approach is contrasted by the top down approach, which begins with an examination of the macroeconomic environment, then progresses to an examination of alternative economies and securities markets, then moves toward industry analysis and the examination of specific securities.

• Question 3697:

  Data Droid manages several investment accounts and directs most of the client transactions through Lore's brokerage firm. Lore provides him with excellent, reliable research, though his commissions are higher than industry standards. The research is used to manage all the client accounts. Data has just been approached by the Troy brokerage firm, which is a newcomer in the business. While this firm does not provide any research, it charges commissions that are significantly lower than those charged by Lore. If Data decides to stay with Lore's brokerage firm

  A. has not violated the code since he has a long-standing relationship with Lore.
  B. he has violated the code of ethics, which requires him to keep the expenses to a minimum.
  C. has not violated the code if Lore's research justifies the additional expenses.
  D. has violated the code by violating the Prudent Man Rule.
  C. has not violated the code if Lore's research justifies the additional expenses.

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  Explanation

  Standard IV (B.1) - Fiduciary Duties

• Question 3698:

  In estimating a firm's earnings multiplier, the expected growth rate is determined by the firm's:

  A. retention rate and expected return on equity
  B. estimated required rate of return and dividend payout ratio
  C. estimated return on equity (ROE)
  D. relationship to its industry and market
  A. retention rate and expected return on equity

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  Explanation

  Higher expected growth rates would indicate that a firm should have a higher multiple than its industry and the market.

• Question 3699:

  A systematic sampling method should not be used when:

  A. the data are commingled.
  B. the data are systematically biased.
  C. the data are already arranged in the form of a predetermined pattern.
  D. the data are divided into open-ended classes.
  C. the data are already arranged in the form of a predetermined pattern.

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  Explanation

  If the data are already arranged in the form of a predetermined pattern, using systematic sampling can introduce a systematic pattern in the sample itself, which would lead to erroneous inferences about the entire population.

• Question 3700:

  Which of the following AIMR Standards states that additional compensation agreements must be disclosed to the employer?

  A. IV
  B. III (D)
  C. V
  D. VI (B)
  B. III (D)

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  Explanation

  Standard III (D) - Disclosure of Additional Compensation Arrangements states: "Members shall disclose to their employer in writing all monetary compensation or other benefits that they receive for their services that are in addition to compensation or benefits conferred by a member's employer."