CFA New 2024 CFA-Level-I Test Tutorial (Updated 2200 Questions)
CFA-Level-I Exam Questions Dumps, Selling CFA Products
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NEW QUESTION # 263
Once a head and shoulders pattern is formed, the expectation is that:
- A. The market will rally again.
- B. The price will decline down through the neckline price.
- C. The price will remain around the neckline and the market will be in balance.
Answer: B
Explanation:
The head and shoulders pattern is not complete and the uptrend is not reversed until neckline support is broken and becomes a new resistance level.
NEW QUESTION # 264
The following figure shows Bobby's indifference map for soda and juice. B1 indicates his original budget line. B2 indicates his budget line resulting from a decrease in the price of soda. What change in quantity best represents his income effect?
- A. 0
- B. 1
- C. 2
Answer: C
Explanation:
25 - 18 = 7.
NEW QUESTION # 265
In 2001, a portfolio with 6 stocks had the following total return rates in percentages:27.98%, 44.94%,
54.53%, -52.68%, 10.21%, 0.50%. The average return rate for this portfolio was 4.92% and the standard deviation was 37.66%. How confident are you that the return rates will fall within -51.57% and 61.41%?
- A. 85%
- B. 75%
- C. 56%
Answer: C
Explanation:
-51.57% is 1.5 standard deviations below the mean and 61.41% is 1.5 standard deviations
2
above the mean. Therefore, we are confident that 1 - 1/1.5 = 56% of the return rates will fall within the specified range (Chebyshev's Inequality).
NEW QUESTION # 266
The standard deviation measures
- A. total risk.
- B. diversifiable risk.
- C. non-diversifiable risk.
Answer: A
Explanation:
Total portfolio risk is diversifiable risk plus non-diversifiable risk.
NEW QUESTION # 267
A put on stock X with a strike price of $40 is priced at $2.00 per share, while a call with a strike price of
$ 40 is priced at $3.50. What are the maximum per share loss to the writer of the uncovered put and the maximum per share gain to the writer of the uncovered call?
Maximum Loss to Put Writer : Maximum Gain to Call Writer
- A. $40.00 : $3.50
- B. $38.00 : $36.50
- C. $38.00 : $3.50
Answer: C
NEW QUESTION # 268
An investor buys shares of ABC Corp. at $30 and immediately writes a call on them. If the call carries a premium of $2.5 and its exercise price is $30, at what price of ABC shares will this investor break-even?
- A. Call options cannot have a negative value, therefore, there is no break-even point.
- B. $32.50.
- C. $27.50.
Answer: C
Explanation:
A call is at the money when its exercise price is equal to the current price of the asset. In this case, both the exercise price and the asset price is $30.
A covered call writer refers to an investor who owns the underlying asset and simultaneously sells (or writes) a call option. If the investor is writing the call, he will receive a premium of $2.50.
Should the asset price close above $30 before expiration, the writer of the call will have to deliver his stock. He loses the stock, but walks away with the premium he made.
On the other hand, if the stock price closes below $30, the writer will not be called upon to deliver the stock. However, the dropping stock price implies that he is losing value on the stock. If the stock price drops to $27.50, he has lost $2.50 on his stock; but since he made $2.50 selling the call in the beginning, he breaks even. Should the stock price drop below $27.50, his losses will offset any money he made selling the call. Hence, $27.50 is the break-even point.
NEW QUESTION # 269
From the perspective of all the firms in an industry, the ideal collusive agreement is identical to the:
- A. monopolistic competition
- B. monopoly equilibrium
- C. competitive equilibrium
Answer: B
Explanation:
The ideal collusive equilibrium is equivalent to the monopoly equilibrium.
NEW QUESTION # 270
I). The generally accepted accounting principle (GAAP) that determines when revenue should be recorded in the accounting records is called the realization principle.
II). The generally accepted accounting principle (GAAP) that determines when expenses should be recorded in the accounting records is called the realization principle.
- A. both are false.
- B. both are true.
- C. only I is true.
Answer: C
Explanation:
I). The realization principle determines when revenue should be recorded in the accounting records. Revenue is realized when services are rendered to customers or when goods sold are delivered to customers.
II). The matching principle is the generally accepted accounting principle that determines when expenses should be recorded in the accounting records. The revenue earned during an accounting period is matched (offset) with the expenses incurred in generating this revenue.
NEW QUESTION # 271
As the manager of a ski resort, you want to increase the number of lift tickets sold by 8%. Your staff economist has determined that the price elasticity of demand for lift tickets is 2. To increase sales by the desired amount, you should decrease the price of a lift ticket by:
- A. 16%
- B. 8%
- C. 4%
Answer: C
Explanation:
Price elasticity of demand = % change in quantity/ % change in price = 8/x = 2. Solve for x.
NEW QUESTION # 272
You are a corporate treasurer who needs to raise money. You expect interest rates to rise before you get the opportunity to issue debt. You could hedge your position by?
- A. Selling T-Bill future contracts
- B. Buying a T-Bill future contract
- C. Buying a stock index future contract
Answer: A
Explanation:
If interest rates rise, prices of existing debt will fall. If you sell t-bill futures you will profit on the transaction. You can sell enough t-bill bills to offset the higher cost of the coupon rate on the debt you eventually issue.
NEW QUESTION # 273
The goal of an investor following a risk management strategy is to:
- A. increase risk because doing so will increase expected return
- B. control or reduce risk even though doing so will decrease expected return
- C. control or reduce risk even though doing so will increase expected return
Answer: B
Explanation:
Risk management or hedging seeks to reduce risk. In a well-functioning market, decreased risk is associated with decreased expected return.
NEW QUESTION # 274
Which of the following statements regarding investment companies is FALSE?
- A. Investment companies invest exclusively in long-term instruments such as stocks, bonds and real estate.
- B. Investors that purchase shares from an investment company become owners of the investment company.
- C. Investment companies provide a means of acquiring international securities.
Answer: A
Explanation:
Investment companies are also heavily involved with money market securities. Money market mutual funds are widely popular and consist of investments in short-term securities.
NEW QUESTION # 275
Your supervisor has asked you to increase trading volume in all discretionary accounts because he wants to increase revenues for the firm. You believe that this would be inappropriate for most of your clients. You should
- A. discuss the situation with the firm's legal counsel and try to disassociate yourself from the practice.
- B. resign your position immediately
- C. contact CFA Institute to report a violation
Answer: A
NEW QUESTION # 276
If a stock's price rises while its volume declines, technicians usually interpret this as a signal that:
- A. The trend is starting to lose its legs and may soon end.
- B. Long positions should be maintained.
- C. The opening and closing prices will be reversed.
Answer: A
Explanation:
The volume information can be crucial for some technicians. In this case the demand for the stock at higher price will cease soon.
NEW QUESTION # 277
Which of the following statements about the statement of retained earnings is false?
- A. It shows whether a corporation has sufficient funds to pay a cash dividend.
- B. It need not be prepared if a separate statement of stockholders' equity is prepared.
- C. It covers the same time period as the income statement, and provides a link between the income statement and the balance sheet.
Answer: A
NEW QUESTION # 278
A property can be purchased for $180,000. The investor provides 20% as owner's equity and borrows the remainder at 8.50% p.a. The investor sells the property for $170,000 in one year. What is the rate of return to the investor? (Ignore costs associated with real estate transactions.)
- A. -61.78%
- B. -5.88%
- C. -38.22%
Answer: A
Explanation:
The investor's equity investment was $36,000 (180,000 x 0.20). The balance, $144,000
($180,000 - $36,000) was borrowed. Upon the sale, the investor uses $144,000 to payoff the loan and
$ 12,240 (144,000 x 0.085) to pay the interest cost for one year. The realized return is calculated as follows:
Return = [(170,000 - 144,000 - 12,240) - 36,000] / 36,000 = - 61.78%.
NEW QUESTION # 279
A job paid $8,700 in 1970, when the CPI was 29. In 2011, the CPI was 164. How much would you have to earn in 2011 to be making the same real wage?
- A. $164,000
- B. None of the above answers is correct.
- C. $58,000
Answer: B
Explanation:
In real terms, the 1970 wage = 8,700/29 = 300. Thus, 300*164= $49,200, the equivalent wage in 2011.
NEW QUESTION # 280
The most commonly used method for appraising residential properties is:
- A. the cost approach
- B. the comparative sales approach
- C. the income approach
Answer: B
Explanation:
The most commonly used approach to appraising residential properties is the comparative sales approach.
NEW QUESTION # 281
Stocks A, B, and C each have the same expected return and standard deviation. Given the correlation coefficients between these stocks shown in the table below, which combination of these stocks will result in the lowest risk portfolio?
- A. equally invested in stocks B and C
- B. equally invested in stocks A and B
- C. equally invested in stocks A and C
Answer: C
Explanation:
Everything else being equal, the portfolio that has the lowest correlation, or most negative, will have the lowest risk.
NEW QUESTION # 282
Branded pharmaceuticals industry is a(n) ______ industry.
- A. cyclical.
- B. growth.
- C. defensive.
Answer: C
Explanation:
Demand for most health care services does not fluctuate with the economic cycle, but demand is not strong enough to be considered "growth".
NEW QUESTION # 283
During a presentation to prospective clients, Sumanta Mitra makes the following two statements
'CFAs represent the elite of all investment professionals and are most qualified to manage your money.' and 'CFA charterholders obtain their charters after passing 3 levels of exams based on a comprehensive and rigorous study program.' Which of the above statements violates Standard VII (B): Reference to CFA
Institute, the CFA Designation, and the CFA Program?
- A. CFAs represent the elite of all investment professionals and are most qualified to manage your money.
- B. CFA charterholders obtain their charters after passing 3 levels of exams based on a comprehensive and rigorous study program.
- C. Both.
Answer: A
Explanation:
Can't speak of the CFA as 'elite', 'most qualified' etc. The second statement is however close to being factual.
NEW QUESTION # 284
Given the following spot rates:
The arbitrage-free value of a 3-year, 10% Treasury issue would be closet to:
- A. 95.16
- B. 94.60
- C. All on-the-run Treasuries equal 100.
Answer: A
Explanation:
Arbitrage-free value = 5/(1.05)1 + 5/(1.052)2 + 5/(1.054115)3 + 5/(1.056174)4 +
5 /(1.058303)5 + 105/(1.060453)6= 95.16
NEW QUESTION # 285
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CFA (Chartered Financial Analyst) Level I certification exam is a globally recognized credential for investment professionals. Administered by the CFA Institute, CFA-Level-I exam is designed to test the candidate's knowledge and understanding of various financial concepts such as economics, ethics, financial reporting, portfolio management, and analysis. Passing the CFA Level I exam is the first step towards becoming a CFA charterholder, which is considered the gold standard in the finance industry.
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