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

CFA Institute CFA-LEVEL-1 Online Questions & Answers

• Question 931:

  Which of the following factors would reduce aggregate demand in the goods and services market?

  A. a decrease in the real interest rate
  B. an increase in the expected inflation rate
  C. increased pessimism concerning the expected strength of future business conditions
  D. an increase in stock prices
  C. increased pessimism concerning the expected strength of future business conditions

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  Explanation

  What people think will happen in the future influences current purchasing decisions. Pessimism about the future state of the economy causes consumers and investors to cut back on their current spending for fear of becoming over extended. This pessimism leads to a decline in aggregate demand.

• Question 932:

  Which of the following can be found in Standard II?

  A. Members shall not participate in plagiarism.
  B. Members shall maintain appropriate records to support the reasonableness of recommendations.
  C. Members shall maintain knowledge of and comply with all applicable laws.
  D. Members shall not undertake any independent practice in competition with employer without written consent.
  E. Members shall make reasonable efforts to achieve public dissemination of material nonpublic information disclosed in breach of a duty.
  A. Members shall not participate in plagiarism.

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  Explanation

  Standard II states: "Members shall not copy or use, in substantially the same form as the original, material prepared by another without acknowledging and identifying the name of the author, publisher or source of such material."

• Question 933:

  According to Standard V (B), firms can claim compliance with the PPS only if their presentation is ________ in compliance with the Performance Presentation Standards in all material respects.

  A. none of these answers
  B. retroactively
  C. fully
  D. at least 50 percent
  E. partially
  C. fully

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  Explanation

  If members or firms want to claim compliance with PPS, their presentation must be fully in compliance with the PPS in all material respects. To claim compliance with the PPS without meeting the mandatory requirements of the PPS is a violation of Standard V (B).

• Question 934:

  The following asset is subject to the least amount of depreciation or amortization during its useful life:

  A. land
  B. warehouse
  C. patents
  D. computer-based equipment
  A. land

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  Explanation

  Land is not subject to any depreciation. The useful life of land does not diminish over time as its economic value does not diminish based on use.

• Question 935:

  Changes in nominal GNP have been found to have

  A. little correlation with sales per share for stock series such as the SandP 400.
  B. a relatively high correlation with EBIT for stock series such as the SandP 400.
  C. a relatively high correlation with sales per share for stock series such as the SandP 400.
  D. a relatively high correlation with net profits for stock series such as the SandP 400.
  C. a relatively high correlation with sales per share for stock series such as the SandP 400.

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  Explanation

  Studies have found that about 40% of the variance in percentage changes in SandP 400 sales can be explained by percentage changes in nominal GNP. Estimating GNP is thus used to help estimate earnings per share for stock series such as the SandP 400.

• Question 936:

  A large net advance on an advance-decline series in a rising market would be viewed by technicians as

  A. a bullish signal.
  B. a sign of caution.
  C. indicative of an uneven market.
  D. irrelevant.
  A. a bullish signal.

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  Explanation

  The large net advance means that considerably more stocks advanced than declined in the series, meaning that the general market rise is broadly based and extends to most of the stocks. This would be viewed as a bullish sign.

• Question 937:

  Your firm's EPS last year was $1.00. You expect sales to increase by 15 percent during the coming year. If your firm has a degree of operating leverage equal to 1.25 and a degree of financial leverage equal to 3. 50, then what is its expected EPS?

  A. $1.6563
  B. $2. 5843
  C. $2. 2427
  D. $1.3481
  E. $1.9813
  A. $1.6563

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  Explanation

  EPS(0) = $1.00. DOL = 1.25. EPS(1) = ?

  %Change S = 15%. DFL = 3. 50.

  DTL = DOL(DFL) = 1.25(3. 50) = 4. 375.

  EPS(1) = EPS(0)[1.0 + (DTL)(%Change Sales)] = $1.00[1.0 + (4. 375)(0.15)] = $1.00[1.6563] = $1.6563.

• Question 938:

  Suppose the lowest-wage state in the U.S. is West Virginia and the highest-wage state is New York. Which of the following would be true?

  A. If New York trades with West Virginia, wages in New York will fall until they equal the wages in West Virginia.
  B. New York would be better of if its state government imposed restrictions on the importation of goods made in West Virginia.
  C. Both New York and West Virginia will be better of if they are allowed to trade freely.
  D. If New York trades with West Virginia, consumers in New York will be worse off.
  C. Both New York and West Virginia will be better of if they are allowed to trade freely.

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  Explanation

  Low-wage and high-wage states (like countries) are better off if they are allowed to freely trade with each other. The comparative advantage of low wage states will be in the production of labor intensive goods while the advantage for high wage states will be in the production of capital intensive goods. By specializing in the area of their comparative advantage, total production for each state will increase as will real income.

• Question 939:

  You borrow $100,000 at a mortgage rate of 8% per year. What's the annual payment you must make to repay the loan in 25 years?

  A. $8,349
  B. $5,982
  C. $9,368
  D. $7,493
  C. $9,368

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  Explanation

  If P is the annual payment, then using the annuity formula, 100,000 = P/0.08*[1 - 1/1.08^25] = 10.67P This gives P = $9,368

• Question 940:

  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.
  C. should be rejected at the corresponding significance level.

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  Explanation

  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.