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

CFA Institute CFA-LEVEL-1 Online Questions & Answers

• Question 3751:

  When preparing a direct method statement of cash flows, the principal component of cash flow from operating activities is

  A. the decrease in accounts receivable.
  B. cash collections.
  C. cash received from short- and long-term borrowings.
  D. the increase in accounts payable.
  E. net income plus depreciation expense.
  B. cash collections.

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  Explanation

  Cash collections is the beginning point and principal component of cash flow from operating activities.

• Question 3752:

  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
  B. Point estimate

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  Explanation

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

• Question 3753:

  A trader has a long position in a wheat contract.

  What is the price at which the trader will receive a maintenance margin call?

  A. $1.90.
  B. $2. 05.
  C. $2. 25.
  D. $1.75.
  D. $1.75.

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  Explanation

  The trader would have to lose $1,250 or 5,000-3,750 before they get a margin call. 5,000(2. 00-P) = 1,250. P = $1.75.

• Question 3754:

  A cumulative frequency distribution on days absent during a calendar year by employees of a manufacturing company is shown below.

  Days Absent Cumulative Number of Employees 0 - 260 3 - 531 6 - 814 9 - 116 12 - 142

  How many employees were never absent?

  A. None of these answers
  B. 29
  C. Cannot be determined from the given data
  D. 31
  E. 60
  C. Cannot be determined from the given data

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  Explanation

  We were given only the number of employees in the 0-2 group. So we do not know how many were never absent since this group includes those who were absent 1 and 2 days.

• Question 3755:

  Which of the following factors account for differences among required rates of return for different countries?

  A. Different risk premiums due to different risk environments
  B. Wide variance in inflation rates
  C. All of these answers
  D. Exchange-rate volatility
  C. All of these answers

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  Explanation

  All of the mentioned variables affect the RFR because they affect an investment's real return.

• Question 3756:

  Which of the following statements about the Securities and Exchange Commission (SEC) is true?

  A. The SEC must audit all financial statements of publicly traded corporations.
  B. The SEC has issued specific rules and regulations concerning the preparation of financial statements and the degree of detail that they contain.
  C. None of these statements are true.
  D. The SEC functions as the standard-setting body of the accounting profession.
  B. The SEC has issued specific rules and regulations concerning the preparation of financial statements and the degree of detail that they contain.

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  Explanation

  The Securities and Exchange Commission has issued specific rules and regulations concerning the preparation of financial statements and the degree of detail that they contain.

• Question 3757:

  An economy is currently operating at full employment. If the Fed unexpectedly decreases the reserve requirement, in the short run, the aggregate output will ________. The unemployment will ________ the natural rate.

  A. fall, rise above
  B. rise, fall below
  C. rise, rise above
  D. fall, fall below
  B. rise, fall below

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  Explanation

  The unexpected decrease in the reserve requirement causes an unexpected expansion in money supply. In the short run, this leads to lower real interest rates. The increased availability of credit coupled with the rise in demand leads to an increase in real output and employment. Temporarily, the unemployment rate falls below the natural rate.

• Question 3758:

  Which of the following best characterizes the last stage in the industrial life cycle?

  A. Growth deceleration and decline
  B. Saturation
  C. Insolvency
  D. Obsolescence
  E. None of these answers is correct.
  F. Mature growth
  A. Growth deceleration and decline

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  Explanation

  The industry life cycle is divided into five distinct stages. Specifically, the industrial life cycle progresses from the development stage to an accelerating growth stage to a mature growth stage to a market maturation and stabilization stage. Finally, the fifth stage of the industrial life cycle is characterized by decelerating growth and sales decline. During the mature growth stage, sales are still growing, albeit slowly. During the last stage of the industrial life cycle, however, is characterizes by a decline in annual sales.

  As an industry or company progresses through the industrial life cycle, sales begin to grow rapidly (accelerating growth) then slow considerably as the product or service begins to reach critical mass (mature growth). During the mature growth stage, the industry or company grows at a slower pace, until eventually growth begins to slow considerably (market maturity and stabilization) as the market for the industry or company's products becomes more completely defined. An industry or company typically reaches the fifth stage of the industrial life cycle, growth deceleration and decline, only after many years of stabilization.

• Question 3759:

  Scott Malooly recently paid $109.05 for a $1000 face value, semi-annual coupon bond with a quoted price of 105 6/32. Assuming that transaction costs are zero, which of the following statements is TRUE?

  A. Malooly purchased the bond between coupon dates.
  B. The price Malooly paid covers the amount of the next coupon payment not earned by the seller.
  C. The bond was trading ex-coupon.
  D. The price Malooly paid includes the discounted amount of accrued interest due to seller.
  A. Malooly purchased the bond between coupon dates.

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  Explanation

  When a bond trades between two consecutive coupon dates, the seller is entitled to receive interest earned from the previous coupon date until the date of the sale. The price paid includes accrued interest and is referred to as the "dirty price." The other statements are false. The price Malooly paid covers the amount of the next coupon payment not earned by the buyer. When a security trades ex-coupon, the buyer pays the clean price, which is the quoted price without accrued interest. Accrued interest is not discounted when calculating the dirty price of a bond.

• Question 3760:

  Given current earnings of $2. 50 per share, an expected dividend growth rate of 12% and a P/E of 12. 5, what is the value of the stock?

  A. $28.62
  B. $35. 00
  C. $37. 45
  D. None of these answers
  B. $35. 00

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  Explanation

  Value = 12. 5 x ($2. 50 * 1.12) = $35