[Jan-2022] CFA-Level-I Braindumps – CFA-Level-I Questions to Get Better Grades
CFA-Level-I Exam Dumps - Try Best CFA-Level-I Exam Questions - Exams4Collection
Topics of CFA CFA-Level-I: CFA Institute CFA Level I Chartered Financial Analyst Exam
Before preparation begins, candidates need to know the examination topics. And it’s going to help them to reach the center. CFA Level 1 dumps will include the following topics:
- Economics
- Ethical and Professional Standards The focus of this topic is ethics, related challenges to ethical behavior, and the role ethics and professionalism play in the investment industry. We provide a framework to support ethical decision making and examine the CFA Institute Code of Ethics and Standards of Professional Conduct and Global Investment Performance Standards (GIPS).
- Quantitative Methods In this section, we explore quantitative concepts and techniques used in financial analysis and investment decision making. We present descriptive statistics for conveying important data attributes, such as central tendency, location, and dispersion, and introduce characteristics of return distributions. The section also considers probability theory and its application in quantifying risk for investment decision making.
In this section, we introduce analysis of fundamental concepts of supply and demand for individual consumers and firms. We also cover the various market structures that firms operate in as well as macroeconomic concepts and principles, including aggregate output and income measurement, aggregate demand and supply analysis, and analysis of economic growth factors. The section concludes with coverage of the business cycle and its effect on economic activity.
Fixed Income In this topic, we explain how to describe fixed income securities and their markets, yield measures, risk factors, and valuation measurements and drivers. We also cover calculating yields, values of fixed income securities, the securitization of assets, the fundamentals of bond returns and risks, and basic principles of credit analysis.
Financial Reporting and Analysis Here we provide a thorough explanation of financial reporting procedures and the standards that govern financial reporting disclosures, with an emphasis on basic financial statements and how alternative accounting methods affect those statements and the analysis of them. We examine primary financial statements and provide a general framework for conducting financial statement analysis.
Portfolio Management In this topic, we explain the fundamentals of portfolio and risk management, including return and risk measurement and portfolio planning and construction. We examine the needs of individual and institutional investors along with the range of available investment solutions. The capital asset pricing model is used to identify optimal risk in portfolios.
Derivatives In this section, we build the conceptual framework for understanding the basic derivatives and derivative markets. We then introduce essential features and valuation concepts for forward commitments such as forwards, futures, swaps, and contingent claims. Finally, we examine arbitrage, a critical concept that links derivative pricing to the price of the underlying asset.
Equity Investments Here we explore the characteristics of equity investments, security markets, and indexes and explain how to analyze industries, companies, and equity securities as well as the use of basic equity valuation models. Global equities are important for meeting longer-term growth and diversification objectives.
Alternative Investments This topic explores alternative investments, including hedge funds, private equity, real estate, commodities, and infrastructure. We cover the use of alternative investments for diversification and higher returns. In this curriculum, we define alternative investments and the characteristics they have in common.
NEW QUESTION 77
ABC Co. has the following segment reporting information for 1998.
Gidgets has a return on assets of:
- A. 104.6%
- B. 10.2%
- C. 6.0%
Answer: C
NEW QUESTION 78
Which of the following measures of dispersion are based on deviations from the mean?
I). Mean absolute deviation
II). Standard deviation
III). Variance
- A. I, II and III.
- B. II and III.
- C. I and III.
Answer: A
Explanation:
The formulas for all three measures are based on the deviation of the mean. Note: variance is the standard deviation squared.
NEW QUESTION 79
An analyst has gathered the following information about a company: Net profit margin of 15%, Asset turnover ratio of 0.267, Equity multiplier of 4.5, Dividend payout ratio of 30%. What is the company's growth rate?
- A. 14.8%
- B. 18.6%
- C. 12.6%
Answer: C
Explanation:
g = (retention rate)(ROE) ROE = (net profit margin)(asset turnover)(equity multiplier) =
(.15)(0.267)(4.5) = 0.180 g = (1 - .3)(0.180) = (.7)(0.18) = 0.126 or 12.6%
NEW QUESTION 80
A company can determine if its ______ objective has been met by evaluating its ability to survive for many years.
- A. profitability.
- B. long-term solvency.
- C. liquidity.
Answer: B
NEW QUESTION 81
Which set of circumstances is most likely to result in a narrow confidence interval?
- A. large n and a degree of confidence of .95.
- B. large n and a degree of confidence of .99.
- C. small n and a degree of confidence of .95.
Answer: A
NEW QUESTION 82
When people pay less for something than it is worth to them, they receive what is called
- A. a deadweight loss.
- B. a consumer surplus.
- C. an economic benefit.
Answer: B
Explanation:
A consumer surplus is the value of a good minus the price paid for it, summed over the quantity bought.
NEW QUESTION 83
You have a friend who works as a legal adviser to a firm which is about to be acquired at a significant premium to the current market price. He informs you of the upcoming acquisition and suggests that you purchase a significant number of shares. He says that while he is an insider, you can trade on the information because you are not.
- A. You can trade on the information because you are not an insider.
- B. You cannot trade on the information because it is material and non-public.
- C. You cannot trade on the information because your friend has breached fiduciary duty.
Answer: B
NEW QUESTION 84
External (informational) efficiency means that:
- A. many buyers and sellers are aware of the trading activity of the market
- B. the market price reflects all available information about a security
- C. the price information generated in the market is broadcast widely
Answer: B
Explanation:
Although all of the characteristics above would be nice and are associated with modern well-functioning markets, the only aspect that is related to external efficiency is whether or not the market price reflects the available information. Ask the question, "How is what we know about a security related to the price of that security?"
NEW QUESTION 85
The strong form of the efficient market hypothesis states that:
I). security prices reflect all publicly available information.
II). insider information contains no special advantage.
III). major market events can be predicted.
- A. II only.
- B. I and II.
- C. I and III.
Answer: B
NEW QUESTION 86
Which statement is FALSE regarding the neutral interest rate?
- A. Different economists may come up with different neutral rates of interest for any given economy at any time.
- B. It is not affected by short-term imbalances in the economy.
- C. It is a fixed number for a country but it varies across different countries.
Answer: C
Explanation:
A is true. It is affected by changes in the structure of the economy such as changes in the rate of population growth, the rate of technological change. B is false. It is not a constant and tends to vary as the economy is subject to shocks. C is true. They may have different views of the growth rate, expected inflation etc. That's why it is not directly observable. The rate has to be estimated usually with a lot of uncertainty has to be estimated, usually with a lot of uncertainty.
NEW QUESTION 87
Gary Ply, a member of a large investment firm, has just secured a new client. In terms of CFA
Institute's Standards of Professional Conduct when dealing with the procedures for compliance per
Standard III (C): Suitability, which of the following factors that need to be considered when looking at the new investors constraints?
I). liquidity needs.
II). time horizon.
III). tax considerations.
IV). proxy voting responsibilities and guidance.
- A. I, II and III.
- B. I, II, III and IV.
- C. II, III and IV.
Answer: B
Explanation:
The following are the factors that need to be considered when looking at a new investor's constraints: liquidity needs, expected cash flows, investable funds, time horizon, tax considerations, regulatory and legal circumstances, investor preferences, circumstances and unique needs, proxy voting responsibilities and guidance.
NEW QUESTION 88
Suppose that P(A) = 0.7 and P(AB) = 0.42, find the probability of B given A, P(B|A).
- A. 0.600
- B. 0.294
- C. 0.829
Answer: A
Explanation:
The correct answer is P(B|A) = P(AB)/P(A) = 0.42/0.7 = 0.60.
NEW QUESTION 89
Tests of the relationship between price earnings ratios and future stock returns suggest that:
- A. high P/E stocks paying no dividend offer the greatest return potential
- B. low P/E stocks offer greater return potential than high P/E stocks
- C. high P/E stocks paying a large dividend offer the greatest return potential
Answer: B
Explanation:
All of the tests show that low P/E stocks out perform on average. This is referred to as the value effect. However, Fama and French found that when they apply the three-factor model instead of the
CAPM, the value stock anomaly disappears.
NEW QUESTION 90
Sampling error, which can be attributed to the fact that only a sample of values is observed, is
- A. the difference between a population value and an estimate of that value.
- B. the standard error of the mean of random samples.
- C. the variance of a random sample.
Answer: A
NEW QUESTION 91
A portfolio consists of 2 bonds:
Bond | Maturity | Coupon | Duration | Proportion in Portfolio
Bond A | 10 years | 8% | 6.7 | 60% Bond B | 7 years | 5.2% |3.9 | 40%
If the yield on Bond A increases by 54 basis points and the yield on Bond B decreases by 79 basis points, compute the percentage change in portfolio value.
- A. 3.404%
- B. -0.938%
- C. -3.404%
Answer: B
Explanation:
Percentage change in portfolio = wA DA (*rA) + wB DB (*rB)= 0.6 * (-6.7) * (0.0054) + 0.4 *
(-3.9) * (-0.0079) = -0.938%.
NEW QUESTION 92
A mortgage real estate investment trust (REIT) offers the investor safety because:
- A. The trust has obtained mortgage financing from large, reputable financial institutions for use in purchasing investment properties.
- B. The portfolio contains only mortgages and loans, which are relatively safe.
- C. All investment properties in a REIT portfolio have an underlying collateral agreement in the form of a mortgage.
Answer: B
Explanation:
Mortgage REIT do not invest in real estate directly. They make real estate loans. Choice a.
above is incorrect because it implies that the mortgage REIT holds properties. This is not true. Mortgage
REITs hold mortgages secured by properties. Mortgage REITs offer investors relative safety because they invest only in mortgages and loans which are relatively safe.
NEW QUESTION 93
Which of the following statements is false with respect to factors that influence the attractiveness of financing with warrants and convertibles?
- A. If management expects future growth prospects to outweigh its risks, then issuing convertible bonds or bonds with warrants would be deemed as more prudent than issuing straight bonds.
- B. These hybrid securities are generally unsecured by the issuer.
- C. These hybrid securities are more commonly issued by either smaller companies or companies that are facing financial distress.
Answer: A
Explanation:
Since a convertible bond will always be higher in price than the corresponding straight bond, its YTM will thus always be lower than that of a straight bond.
If management expects future growth prospects to outweigh its risks, than issuing convertible bonds or bonds with warrants would imply that these future earnings will have to be shared among new shareholders as well. Thus, the more prudent move would be to issue straight bonds so that the exiting shareholders may keep those increased earnings amongst themselves.
NEW QUESTION 94
Slalom Brothers finances the purchase of $125,000,000 par value of a bond with a repurchase agreement. Bank of New York is the lending party in the repurchase agreement. Bank of New York agrees to purchase $125,000,000 par value of the bond at $124,531,250 from Slalom Brothers with a commitment to sell the same bonds back to Slalom Brothers for $124,545,952 one day later. What is the repurchase rate for this one-day loan?
- A. 3.75%
- B. 4.25%
- C. 3.00%
Answer: B
NEW QUESTION 95
Assume the risk-free rate is 5%. The expected return on the market portfolio is 12%, and its standard deviation is 20%. A company has an expected return of 18%, a standard deviation of 90% and a correlation of 0.5 with the market. What is the company's Treynor ratio?
- A. 0.058.
- B. 0.047.
- C. 0.087.
Answer: A
Explanation:
B = poi / oM = 0.5 x 0.9 / 0.2 = 2.25.
(18% 5%)/225 0058 (18% -5%) / 2.25 = 0.058.
NEW QUESTION 96
In the mid-1990s, the United States considered requiring tomatoes to be stacked in boxes without padding. The effect of this regulation would have been to ruin vine-ripened tomatoes imported from
Mexico. Such an act is considered an example of a
- A. VER.
- B. non-tariff barrier.
- C. quota.
Answer: B
Explanation:
Non-tariff barriers are indirect regulatory restrictions on imports and exports. Shipping requirements are an example of this.
NEW QUESTION 97
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