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

CFA Institute CFA-LEVEL-1 Online Questions & Answers

• Question 81:

  Which of the following is not considered a relevant concern in determining incremental cash flows for a new product?

  A. The cost of a product analysis completed in the previous tax year and specific to the new product.
  B. All of these are relevant.
  C. The use of factory floor space which is currently unused but available for production of any product.
  D. Shipping and installation costs associated with preparing the machine to be used to produce the new product.
  E. Revenues from the existing product that would be lost as a result of some customers switching to the new product.
  A. The cost of a product analysis completed in the previous tax year and specific to the new product.

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  Explanation

  The product analysis cost is considered a sunk cost and is not relevant.

• Question 82:

  A sample of the personnel files of eight male employees revealed that during a six month period, they lost the following number of days due to illness: 2, 0, 6, 3, 10, 4, 1 and 2. What is the mean deviation (in days)?

  A. 2 3/8
  B. None of these answers
  C. 1
  E. 3 1/8
  A. 2 3/8

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  Explanation

  The mean is 3. 5. The mean deviation is the absolute values of the deviation from the mean. (1.5 + 3. 5 + 2. 5 + 0.5 + 6. 5 + 0.5 + 2. 5 + 1.5)/8 = 19/8 = 2. 375

• Question 83:

  Which of the following is NOT a violation of Standard III (B) - Duty to Employer?

  A. Using the current employer's client list for personal independent practice.
  B. Rendering services to independent clients without informing them about your current employment status but after obtaining written permission from the current employer.
  C. Provide free tax assistance to "low-income" people on a volunteer basis, without expecting or accepting any compensation when some of these people can be potential clients of your current employer.
  D. None of these answers.
  C. Provide free tax assistance to "low-income" people on a volunteer basis, without expecting or accepting any compensation when some of these people can be potential clients of your current employer.

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  Explanation

  Standard III (B) prohibits an employee from going into a competitive business while currently employed without obtaining written permission. However, this applies only if the independent practice is for remuneration. Strictly volunteer activities (such as helping low-income people with free financial advice) which cannot be construed as being done for potential compensation do not constitute a violation of the standard even if they result in some loss of business to the current employer. However, the code is not explicit on this point. Obviously, "free tax assistance" to high-income people will never be considered a volunteer activity.

• Question 84:

  Given the following information, what would the expected industry rate of return equal?

  Retention rate= 80% Net earnings estimate= $15. 00/share Multiple estimate= 22 Current earnings= $13. 95/share Current multiple= 21

  A. 12. 8%
  B. 12. 2%
  C. 13. 7%
  D. 14. 0%
  E. 11.9%
  C. 13. 7%

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  Explanation

  Expected industry return = (Index estimate - Current index + Dividend) / Current index = (330 - 292. 95 + $3. 00) / 292. 95 = 13. 7%

  Index estimate = $15. 00 x 22 = 330 Current index = $13. 95 x 21 = 292. 95 Dividend = (1 - .80) x $15. 00 = $3. 00

• Question 85:

  If you deposit $123 into an account paying 6% per year simple interest, what is the balance in your account 8 months later?

  A. $182. 04
  B. $246. 00
  C. $123. 92
  D. $127. 92
  E. $131.51
  D. $127. 92

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  Explanation

  Calculate the simple interest earned and add it to the original deposit. On the BAII Plus, press 123 x 0.06 x 8 divide 12 = + 123 = to see the answer. On the HP12C, press 123 ENTER 0.06 x 8 x 12 divide 123 + to see the answer.

• Question 86:

  How much will $1,250 become after 7 years at 10% per year, compounded annually?

  A. $2,298.66
  B. $1,324. 77
  C. $2,435. 90
  D. $2,500.00
  E. $2,388.14
  C. $2,435. 90

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  Explanation

  On the BAII Plus, press 7 N, 10 I/Y, 1250 PV, 0 PMT, CPT FV. On the HP12C, press 7 n, 10 i, 1250 PV, 0 PMT, FV. Note that the answer will be displayed as a negative number. Make sure the BAII Plus has the P/Y value set to 1.

• Question 87:

  Susan Jackson, with HRS Investments, is appearing in court as an expert witness. She will have to use research done at HRS, to which she did not contribute directly, during her testimony. Which of the following is true, in relation to Jackson's need to comply with Standard II (C)?

  A. Jackson is representing herself and may or may not attribute any of HRS's research.
  B. Jackson is representing HRS and must attribute any of HRS's research.
  C. Jackson is representing herself and must attribute any of HRS's research.
  D. There is not enough information given to answer this question.
  E. Jackson is representing HRS and may or may not attribute any of HRS's research.
  C. Jackson is representing herself and must attribute any of HRS's research.

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  Explanation

  Expert witnesses represent themselves, not organizations. Thus, Susan must attribute any of HRS's research to HRS and the team that conducted the research.

• Question 88:

  You wish to determine the number of unique combinations that can result from a process that involves n_1 options in one respect, n_2 in another respect, and so on. The counting method you should use is:

  A. The binomial formula.
  B. The multiplication rule.
  C. The multinomial formula.
  D. The permutation rule.
  B. The multiplication rule.

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  Explanation

  The multiplication rule of counting states that the number of combinations available when there are n_1 options in one aspect, n_2 in another, and so on, up to n_k, is n_1 * n_2 * ... * n_k.

• Question 89:

  Dandy Product's overall weighted average required rate of return is 10 percent. Its yogurt division is riskier than average, its fresh produce division has average risk, and its institutional foods division has below-average risk. Dandy adjusts for both divisional and project risk by adding or subtracting 2 percentage points. Thus, the maximum adjustment is 4 percentage points. What is the risk-adjusted required rate of return for a low-risk project in the yogurt division?

  A. 8%
  B. 10%
  C. 14%
  D. 12%
  E. 6%
  B. 10%

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  Explanation

  k(YD) = 10% + 2% = 12%.

  However, for a low-risk project, Dandy Product subtracts 2 percentage points. Therefore, the required rate of return is 10 percent.

  k(YD,Low risk project) = 10% + 2% - 2% = 10%.

• Question 90:

  The NAV of a closed-end investment company is computed ________.

  A. twice every day of trading
  B. once every day of trading
  C. once every financial year
  D. once every financial quarter
  A. twice every day of trading

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  Explanation

  The NAV of a closed-end investment company is computed twice every day of trading when there are prevailing market prices for the portfolio securities.