Updated Oct-2021 Pass CFA-Level-I Exam - Real Practice Test Questions
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Introduction to CFA CFA-Level-I: CFA Institute CFA Level I Chartered Financial Analyst Exam
The complete CFA module is a chartered financial analyst. CFA is one of the most sought-after designations for investment practitioners. This credential is a world-renowned financial accounting and finance certificate from the CFA Institute. The CFA course is known to be the world’s most accepted and identified classification for investment management. Applicants who pursue the course develop a thorough understanding of the stock industry that raises their odds of well-paid careers. In India, industrialization and globalisation fuel the CFA market. Candidates seeking to earn the credentials of the CFA Institute must have three assessment phases conducted by the CFA Institute:
- Level 1, 2 and Level 3 These reviews are conducted in areas such as finance, accounting, security monitoring and money management. Level I exams take place in June and December, and levels II and III only take place in June. For anyone wishing to build a long-term career in the areas of retail, industrial and financial services. In addition, CFA level 1 exam test and CFA level 1 dumps are also available after completion. Since CFA is a curriculum at its own pace, there are no regular courses for applicants.
NEW QUESTION 930
You are reviewing a list of 8 recommended securities and wish to invest in 4. You will put 40% of your capital in one, 30% in another, 20% in the third, and 10% in the last one. How many different ways can you choose among the 8 securities and invest according to your design?
- A. 1,680.
- B. 1,980.
- C. 1,774.
Answer: A
Explanation:
The combination, or binomial formula, gives the number of ways that k objects can be chosen from n items, without regard to the order of choosing. The formula is (n choose k) = n! / [k! *(n-k)!].
However, in this case, the order does matter. If we choose stocks 3, 1, 7, and 5, we don't consider that the same as choosing 5, 7, 1 and 3, because the portfolio weights would differ. We need the general permutation formula, which gives the number of ways that k objects can be chosen from n items, with regard to order. The formula is n_P_k = n! / (n-k)!. Here, it is 8! / (8-4)! = 8 * 7 * 6 * 5 = 1,680.
NEW QUESTION 931
If a researcher were to choose random days and calculate the difference in sales volume for the two fish markets in New Bedford, Massachusetts and analyze those differences, what type of experiment is being conducted?
- A. F test
- B. paired difference
- C. t test
Answer: B
NEW QUESTION 932
In a purely floating exchange rate economy, a shift toward a more expansionary monetary policy will move the capital/financial account toward a ________. The current account will move toward a ________.
- A. deficit; deficit
- B. surplus; deficit
- C. deficit; surplus
Answer: C
Explanation:
An expansionary monetary policy will speed up the economic growth, increase inflation and decrease real interest rates by increasing the money supply. This decrease in real rates will cause an outflow of funds into economies offering higher rates, causing the domestic currency to depreciate. The outflow of funds will move the capital/financial account toward a deficit (or a smaller surplus). The current account will move toward a surplus since the changes in current and capital/financial accounts in a purely floating economy must equal zero. Over a slightly longer run, the depreciation in the domestic currency will increase exports and decrease imports, moving the current account further toward a surplus.
Therefore, always look at the effects on the capital/financial account first.
NEW QUESTION 933
Vickery, a trustee for the pension plan of Richardson Industries, has just received a commission schedule from XYZ Brokerage, a firm with which he is not currently trading. The fee schedule is lower than that charged by ABC Brokerage, the firm Vickery now uses for most transactions. ABC also provides research data and performance measurement for the pension plan, services which XYZ is not equipped to handle. Vickery is concerned that he may be violating his fiduciary duty of loyalty by not using the lowest cost brokerage firm. Which one of the following statements is true?
- A. Vickery will not violate his fiduciary duty unless he personally profits from his relationship with ABC
- B. Vickery will violate his fiduciary duty unless he immediately transfers his entire business to XYZ.
- C. Vickery can continue to trade through ABC if he determines, in good faith, that the value of the services are commensurate with the cost.
Answer: C
NEW QUESTION 934
The _____ is the period of time required for the firm to acquire inventory, sell the finished goods, and collect the proceeds.
- A. cash cycle.
- B. operating cycle.
- C. inventory period.
Answer: B
Explanation:
A). This period is not affected by the amount of time it takes to collect on a receivable.
C). This period measures the time it takes for cash to flow in once it has flowed out of the firm.
NEW QUESTION 935
An import quota or tariff on Chinese crayfish tails that raises the price of crayfish tails is likely to
- A. hurt both domestic consumers of crayfish and crayfish farmers by increasing the level of competition in the crayfish industry.
- B. hurt domestic crayfish farmers who will lose business because of higher prices.
- C. hurt domestic consumers of crayfish and help domestic crayfish farmers who gain from the higher prices.
Answer: C
Explanation:
Domestic crayfish producers will gain from restricted competition and higher prices.
Domestic consumers will lose for the same reasons.
NEW QUESTION 936
A firm that is 100 percent stock financed with assets of $1 million is considering a stock repurchase of
1 0 percent of its shares. Assume the firm has 20,000 shares outstanding and that Net Income is $120,000.
Assume that book and market values are identical. The impact of the repurchase on the stock price would be closest to:
- A. there will be no change
- B. an increase of $5.56
- C. an increase of $2.78
Answer: B
Explanation:
Currently, the stock price is $1,000,000/20,000 = $50/share; the current EPS is
$ 120,000/20,000 = $6/share; and the P/E ratio is $50/$6 = 8.33x. Assuming that the stock repurchase does not impact the firm's earnings or P/E ratio, then the post repurchase EPS will be
$ 120,000/(20,000-2,000) = $6.67 and the post repurchase share price will be 8.33 x $6.67 = $55.56. This is an increase of $5.56.
NEW QUESTION 937
The main difference between the current ratio and the quick ratio is that the quick ratio excludes:
- A. assets.
- B. sales.
- C. inventory.
Answer: C
Explanation:
Current ratio = current assets/current liabilities = [cash + marketable securities + receivables
+ inventory]/ current liabilities
Quick ratio = [cash + marketable securities + receivables]/current liabilities
NEW QUESTION 938
As per Standard VI (A) of the Code and Standards, that deals with the disclosure of conflicts, a CFA
Institute member that is elected to serve as a Trustee of a large Pension fund, may do so, provided that:
- A. The new position is not time consuming and does not take away time from performing his duties to his current employer.
- B. The member reports the position and gets the consent of his employer.
- C. The member may not accept the new position.
Answer: B
Explanation:
The member would need to report his appointment and get permission from his superior, since the job is likely to involve investment activities. The fact that the position would be profitable to the employer or not time consuming is irrelevant to the fact that the member would need to report the matter to his employer.
NEW QUESTION 939
Which one of the following is an example of "other revenues and gains" in a multiple income statement for a manufacturing company?
I). dividend revenue.
II). rental revenue.
- A. I and II.
- B. II only.
- C. I only.
Answer: A
Explanation:
Special gains and losses that are infrequent or unusual, but not both, are normally reported in non-operating section of a multi-step income statement. These items generally break down into two main subsections: other revenues and gains, and other expenses and losses (e.g. interest on bonds and notes).
NEW QUESTION 940
The 6-month Treasury bill spot rate is 4.0%, and the 1-year Treasury bill spot rate is 5.0%. The implied 6-month forward rate 6 months from now is:
- A. 4.5%.
- B. 3.0%.
- C. 6.0%.
Answer: C
NEW QUESTION 941
To calculate the cash ratio, the total of cash and marketable securities is divided by:
- A. current liabilities
- B. total assets
- C. total liabilities
Answer: A
Explanation:
Current liabilities are used in the denominator for the: current, quick, and cash ratios.
NEW QUESTION 942
Almost all bonds and currencies trade in:
- A. Order-driven markets.
- B. Brokered markets.
- C. Quote-driven markets.
Answer: C
Explanation:
In a quote-driven market customers trade at the prices quoted by dealers.
NEW QUESTION 943
BWT, Inc. shows the following data in its financial statements at the end of the year. Assume all securities were outstanding at the beginning of the year:
6.125% convertible bond, convertible into 33 shares of common stock. Issue price $1,000, 100
*
bonds outstanding.
6.25% convertible preferred stock, $100 par, 3,710 shares outstanding. Convertible into 3.3
*
shares of common stock, Issue price $100
8% convertible preferred stock, $100 par, 5,604 shares outstanding. Convertible into 5 common
*
shares, Issue price $80
12,380 warrants are outstanding with an exercise price of $40. Each warrant is convertible into 1
*
share of common.
Average market price of common is $53.00 per share. Common shares outstanding at the
*
beginning of the year were 45,888.
Net Income for the period was $200,000, while the tax rate was 40%.
*
What was the after-tax interest charge?
- A. 0
- B. 1
- C. 2
Answer: B
Explanation:
(100 bonds)($61.25 interest per bond) = $6125 interest paid ($6125)(1-.4) = $3675 interest.
NEW QUESTION 944
Discouraged workers
- A. are workers whose productivities are lower than average workers.
- B. are discouraged because their current employment compensations are low, but they believe deserve higher wages or salaries.
- C. are not working, and not even officially unemployed.
Answer: C
Explanation:
Discouraged workers gives up looking for work since they believe that additional job search would be useless. They are therefore no longer counted as unemployed. This is one of unemployment measurement problems.
NEW QUESTION 945
Economic analysis suggests that patent laws, which can often be used to limit the entry of potential competitors into an industry,
- A. may be a source of business monopoly power and they also discourage innovation and the development of cost-reducing production techniques in the long run.
- B. encourage product development and the adoption of cost-reducing technologies in the short run but in the long run generally lead to business monopoly.
- C. may grant temporary monopoly power, but the existence of such laws may also encourage innovation and the development of many items highly valued in society.
Answer: C
Explanation:
Patents provide inventors with an incentive to conduct research and development in the pursuit of new products and innovations. The incentive is that if the inventor creates a desirable product, he or she will have a monopoly in its production for 17 years.
NEW QUESTION 946
The key difference between investors and information-motivated traders is:
- A. their expected holding periods.
- B. the risks they take.
- C. their motives for trading.
Answer: C
Explanation:
Investor can take high or low risk positions, and their holding periods can be long or short.
The characteristic that most distinguishes investors from information-motivated traders is the return they expect.
NEW QUESTION 947
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