2021 Realistic Verified Free CFA CFA-Level-I Exam Questions
CFA-Level-I Real Exam Questions and Answers FREE
NEW QUESTION 632
Which institutional investor has the longest investment time horizon?
- A. A defined benefit pension plan that is closed to new members.
- B. Stanford University Endowment Fund.
- C. A property insurance company.
Answer: B
Explanation:
University endowments are established with the intent of having perpetual lives.
NEW QUESTION 633
A dormitory on campus houses 200 students. 120 are male, 50 are upper division students, and 40 are upper division male students. A student is selected at random. The probability of selecting a lower division student, given the student is a female, is:
- A. 2/5
- B. 7/20
- C. 7/8
Answer: C
NEW QUESTION 634
Under what conditions can a monopolist have potentially lower costs and possibly charge a lower price than would exist if the market were competitive?
- A. when substantial economies of scale are present
- B. when the monopolist operates on the inelastic portion of the demand curve
- C. when the monopolist is a profit maximizer rather than a revenue maximizer
Answer: A
Explanation:
When significant economies of scale are present (usually due to the presence of enormous fixed costs) it is more efficient for one firm to produce the entire industry's output because it can do so at a lower average cost than many small rival firms.
NEW QUESTION 635
Which of the following is LEAST accurate with the respect to why domestically listed firms choose to be listed abroad?
- A. Increased liquidity, thus reducing the required rate of return on these shares.
- B. Reduced transaction costs for the issuer's securities in the foreign market.
- C. Reduced reporting requirements in the foreign markets.
Answer: C
Explanation:
Companies generally cross list in a developed market. Such being the case, the reporting requirements are mush more stringent in developed markets. Hence, these reporting requirements are not the main reason why more companies cross list in developed markets.
NEW QUESTION 636
A beginning amount of $75,000 is invested at 13% per year. At the beginning of each year for the next 30 years, a withdrawal is to be made to pay insurance premiums. What is the largest premium this investment will support?
- A. $7,836.01
- B. $10,005.80
- C. $8,854.69
Answer: C
Explanation:
BGN, PV = -$75,000; n = 30; i = 13%; CPT PMT = $8,854.69
NEW QUESTION 637
The futures exchanges industry is an industry that is ______.
- A. concentrated with weak pricing power.
- B. fragmented with strong pricing power.
- C. concentrated with strong pricing power.
Answer: C
Explanation:
There is only one major futures exchange in the U.S. - Chicago Mercantile Exchange.
NEW QUESTION 638
Features of a firm's technology that lead to falling long-run average cost as output increases are
- A. diseconomies of scale.
- B. economies of scale.
- C. diminishing returns.
Answer: B
NEW QUESTION 639
Duration estimates for option-free bonds are
- A. stable only when interest rate shocks are small.
- B. stable when interest rate shocks are either small or large.
- C. volatile when interest rate shocks are large.
Answer: B
NEW QUESTION 640
Under the completed-contract method, the billings on construction contract represents:
- A. a measure of the revenue recognized to date.
- B. a measure of the contractor's performance to date.
- C. a measure of the contractor's obligation to perform on the contract.
Answer: C
Explanation:
The billings on construction contract account is the amount that has been billed to the purchaser and represents a measure of the contractor's obligation to perform on the contract.
NEW QUESTION 641
At higher levels of output, total cost tends to:
- A. increase at a decreasing rate.
- B. increase at an increasing rate.
- C. decrease at an increasing rate.
Answer: B
Explanation:
At higher levels of output, total cost is increasing at an increasing rate because of the law of diminishing marginal product, which implies increasing marginal cost.
NEW QUESTION 642
A student's grade in a course is determined by her score on two exams. The probability that she passes the first exam is 0.85, the probability that she passes the second exam is 0.80, and the probability that she passes both exams is 0.78. What is the probability that she passes at least one of the exams?
- A. 0.05
- B. 0.87
- C. 0.83
Answer: B
Explanation:
Let A denote the event she passes the first exam and B denote the event she passes the second exam, then P(A or B) = P(A) + P(B) - P(A and B) = 0.85 + 0.80 - 0.78 = 0.87.
NEW QUESTION 643
A closed-end investment company that invests in various types of real estate and/or real estate mortgages is called a:
- A. property annuity.
- B. REIT.
- C. real property mutual fund.
Answer: B
Explanation:
REITs securitize real estate assets and facilitate indirect investment in real estate market.
NEW QUESTION 644
You are the Senior Analyst at an Investment Bank who is in the process of underwriting a firm's primary stock offering. However, through in depth analysis, you discover that the Firm whose stock your firm is underwriting is experiencing severe cash flow problems that could lead to it going insolvent. This fact is NOT mentioned in the prospectus. What should you do?
- A. Ignore the information due to its sensitivity.
- B. Notify potential investors with respect to the problem.
- C. Report the issue to your supervisor.
Answer: C
Explanation:
A member's responsibilities with respect to the fundamental responsibilities are clearly set out in this statement. All the other solutions provided are not detailed in this standard.
A member that is aware of a misleading statement relating to a prospectus must follow the following procedures:
Report the misleading statement to the supervisor.
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If the supervisor does not dissociate, then the member must sever all connections to the client.
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The member should seek legal advice.
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NEW QUESTION 645
For the hypothesis test shown at the right, the decision should be ______.
- A. Accept H0
- B. Fail to reject H0
- C. Reject H0
Answer: C
Explanation:
Because the sample data, x-bar 165, has a z-score of 2.5 (the test value) and this z-score is in the critical region (critical value is 1.645, the cut-off for the top 5% of the normal distribution), the
Decision is Reject H . That is, we do not believe this sample data came from a population whose mean is
0
1 60 or less. Note- the p-value for an x-bar of 165 is 0.6%.
NEW QUESTION 646
On May 15, your firm receives 20 cases of designer pens. On June 30, your firm pays $3,250 for the pens. On July 15, the pens are sold on credit for $10,500. On September 10, your firm collects the receivable in full. If each transaction occurs at the end of the business day, how many days are in the inventory period?
- A. 61 days
- B. 46 days
- C. 72 days
Answer: A
Explanation:
The number of days in the accounts payable period: 46 days. The number of days in the accounts receivable period: 57 days. The number of days in the cash cycle: 72 days.
NEW QUESTION 647
Which of the following statements about liability is false?
- A. Cash dividends should be recorded as a liability when they are declared by the board of directors.
- B. A company may exclude a short-term obligation from current liabilities if the firm intends to refinance the obligation on a long-term basis and demonstrates an ability to complete the refinancing.
- C. Payroll taxes withheld from employees' payroll cheques should never be recorded as a liability since the employer will eventually remit the amounts withheld to the appropriate taxing authority.
Answer: C
Explanation:
The definition of a liability includes payroll taxes since the company is obligated to make the payments to the Government at some point in the future, after the expenses are incurred.
NEW QUESTION 648
You invest $100 in a risky asset with an expected rate of return of 12% and a standard deviation of
1 5% and a T-bill with a rate of return of 5%. What percentages of your money must be invested in the risk-free asset and the risky asset, respectively, to form a portfolio with a standard deviation of 6%?
- A. 40% and 60%
- B. 30% and 70%.
- C. 60% and 40%
Answer: C
Explanation:
40% x 15% = 6%.
NEW QUESTION 649
A positively skewed distribution:
- A. is skewed to the left.
- B. has fat tails and has a large variance.
- C. is skewed to the right.
Answer: C
Explanation:
In a positively skewed distribution, small values are more common than correspondingly large values. This skews the distribution to the right, moving the mean to the right of the median.
NEW QUESTION 650
Nabil buys 100 shares of "take a chance technologies" stock at $20 per share and wants to limit his losses. He could place a ______ order to sell 100 shares at $15, good until cancelled.
- A. stop
- B. market
- C. put
Answer: A
NEW QUESTION 651
Stock A has a standard deviation of 16% and a beta of 1.1. T-bills are currently yielding 3.7% on an annualized basis. The expected return on the market index is 9.1% while its standard deviation is 14.9%.
If Stock B is expected to earn 10.51% and it is of equal risk to Stock A, which of the following statements would be the most accurate?
- A. Since Stock A has an expected return of 11.41%, it must be underpriced.
- B. Since Stock A has an expected return of 9.64%, it must be overpriced.
- C. Since Stock A has an expected return of 9.64%, it must be underpriced.
Answer: B
Explanation:
Stock A's E(R) is 9.64% [3.7% + 1.1 * (9.1% - 3.7%)], and stock B's E(R) is 10.51%. Stock A is overpriced (this results a lower expected return.)
NEW QUESTION 652
A long-term asset is different from inventory primarily because:
- A. A long-term asset has physical substance.
- B. A long-term asset is used in operations and not for resale.
- C. A long-term asset is long-term in nature.
Answer: B
NEW QUESTION 653
The prices of petroleum products, including gasoline and fuel oil, decline sharply. Which of the following will most likely result from the lower prices of petroleum products?
- A. an increase in demand for home insulation products.
- B. an increase in demand for smaller, more efficient automobiles.
- C. an increase in demand for products that are heavy users of gasoline.
Answer: C
Explanation:
A decline in the price of gas will increase the demand for goods used in conjunction with gasoline, such as automobiles.
NEW QUESTION 654
Which of the following accounts is an asset?
- A. Prepaid Insurance.
- B. Insurance Payable.
- C. Unearned Insurance Fees.
Answer: A
Explanation:
Unearned Insurance Fees is a liability account. Liability accounts represent an obligation to make payment, transfer assets, or provide services to other entities in the future. Asset accounts represent economic resources owned by a business. Prepaid Insurance is an asset account because it represents insurance that has been paid for in advance.
NEW QUESTION 655
What is the duration estimate of the dollar price change for a 10%, 20-year bond with a duration of
9 .969, selling at 132.03, when the yield changes by 1 basis point?
- A. 9.969
- B. 0.1316
- C. 0.09969
Answer: B
Explanation:
Approximate percentage price change = 9.969(.0001)(100) = .09969% Approximate dollar price change =.09969%(132.03) = $0.1316
NEW QUESTION 656
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