Pass Your CFA CFA-Level-I Exam with Correct 2200 Questions and Answers
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How to book CFA CFA-Level-I: CFA Institute CFA Level I Chartered Financial Analyst Exam
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NEW QUESTION 200
A firm had an asset with a carrying value of $600,000. The estimated future undiscounted cash flows from the use of the asset have decreased to $300,000. Under U.S. GAAP, the firm should:
I). write down the asset
II). recognize an impairment loss
III). determine the fair value of the asset, if possible
- A. I, II and III.
- B. II and III.
- C. I and II.
Answer: A
Explanation:
When the undiscounted estimated cash flows expected from use of the asset are decreased significantly, there exists one of the conditions for recognizing an impairment of value.
NEW QUESTION 201
Peter Chairly is a energy analyst with Tableless Brokers. He is invited by Vrich Energy to visit their oil fields in Siberia. Chairly stays at accommodation owned by Vrich adjacent to their oil fields, there being no other place to stay within hundreds of miles. Chairly visits the oil fields and chats with production supervisors. The accommodation and meals provided by Vrich are modest. Chairly returns from the trip and writes a report in which he gives a 'buy' rating to Vrich Energy.
- A. Peter is in violation of the Standards as during his trip he put himself in a situation where he may have received non-material public information.
- B. Peter is in violation of the Standards as he has accepted benefits from Vrich.
- C. Peter is not in violation of the Standards if after using his judgment he feels that the modest hospitality offered by Vrich did not compromise his independence.
Answer: C
Explanation:
As there is no other accommodation available, and the services provided modest, Chairly hasn't violated the Standards.
NEW QUESTION 202
A dramatic increase in the demand for short-term U.S. Treasury issues versus intermediate and long-term issues will have which of the following effects on the Treasury Yield curve?
I). An inverted yield curve will steepen.
II). An inverted yield curve will flatten.
III). A flat yield curve will become upward sloping.
IV). An upward sloping yield curve will flatten.
V. An upward sloping yield curve will steepen.
- A. II, III and V.
- B. II and V.
- C. I III and V.
Answer: A
Explanation:
A dramatic increase in the demand for short-term U.S. Treasury issues will cause the yields on these issues to fall relative to intermediate-term and long-term issues. This will have the following effects on the U.S. Treasury Yield curve: A flat yield curve will become upward sloping An upward sloping yield curve will steepen An inverted yield curve will flatten (or in extreme cases will become upward sloping).
The reason for these shifts is that a decrease in the yield on short-term Treasury issues versus intermediate and long-term U.S. Treasury issues will cause a shift in the yield spread between these securities, i.e. the difference between the yields on short-term issues and the yields on intermediate and long-term issues will be change. The U.S. Treasury Yield Curve will illustrate this change.
NEW QUESTION 203
On a common-size financial statement, which of the following is given a designation of 100%?
- A. Net revenues
- B. Total liabilities
- C. Net income
Answer: A
Explanation:
Net revenues is given the designation of 100% in a common-size income statement. Each component of the income statement, including net income, is shown as a percentage of net revenues.
NEW QUESTION 204
The following table gives the stock price, dividend, and percentage return for 10 months.
Month; Stock Price; Dividend; Total Return (%)
Jan; 76.3; 1.53; 9.81
Feb; 72.5; 1.45; -3.08
Mar; 70.4; 1.41; -0.95
Apr; 69.8; 1.4; 1.14
May; 71.2; 1.42;
Jun; 73.6; 1.47; 5.44
Jul; 73.7; 1.47; 2.13
Aug; 73; 1.46; 1.03
Sep; 69.5; 1.39; -2.89
Oct; 67.9; 1.36; -0.35
If one were to construct a frequency histogram for the stock prices using 3 classes, the first interval would be which of the following?
- A. 70.7 up to 72.7
- B. 67.9 up to 70.7
- C. 67.9 up to 72.7
Answer: B
Explanation:
If 3 intervals are to used then the length of the intervals is (76.3 - 67.9)/3 = 2.8, so the first interval would be from 67.9 up to 67.9+2. 8=70.7
NEW QUESTION 205
The nation of Economica has increased their M1 money supply by 10% over the last year by printing currency. This policy causes no price inflation. Which of the following could explain this phenomenon?
I). The nation of Islandia begins using the Economican currency as a reserve.
II). Aggregate output increases in Economica.
III). The Central Bank begins a government debt buy-back program.
- A. I, II.
- B. I only.
- C. I, II, III.
Answer: A
Explanation:
Under the basic price level equation P = M / Y (Price Level = Money Supply / Output, ignoring the velocity of money for the moment), a 10% increase in the money supply would result in an increase in the price level. One obvious thing that could prevent price inflation would be a corresponding increase in output. Another possibility would be some reduction in the money available for purchase of goods, such as a foreign nation holding domestic currency as reserve.
When Central Banks buy government debt, they usually do so with newly printed cash, and even if not, a debt buy-back would serve to decrease interest rates, which would result in an expansion of the money supply.
NEW QUESTION 206
Which of the following statements is true?
- A. If average total cost is decreasing, marginal cost must be decreasing.
- B. If marginal cost is decreasing, average total cost must be decreasing.
- C. If marginal cost is greater than average variable cost, average variable cost must be increasing.
Answer: C
Explanation:
This can be easily seen by drawing a set of cost curves. The marginal curve "pulls" the average curves, so if the marginal is greater than the average, the average will rise. If the marginal is less than the average, the average will fall. No other statements are correct.
NEW QUESTION 207
An individual has part of his money tied up in 6 stocks. He decided that each must remain in his portfolio, be sold, or be given to his son. How many possible outcomes does this individual face?
- A. 0
- B. 1
- C. 2
Answer: A
Explanation:
6
The number of possible outcomes is 3 = 729.
NEW QUESTION 208
Consider a two-year currency swap, with semi-annual settlements. It is fixed dollar rate for fixed yen rate swap. The initial exchange rate is 99 Yen to the dollar. Notional principal is $100 million. The fixed dollar rate is 6%. The fixed yen rate is 2%. Who pays whom how much at the first settlement date?
- A. The answer depends on which currency appreciated and which one depreciated.
- B. The yen payer pays 99 million yen only.
- C. The dollar payer pays $3 million, and the yen payer pays 99 million yen.
Answer: C
NEW QUESTION 209
Typically an RSI is considered oversold if it is:
- A. between 30 to 70.
- B. above 70.
- C. below 30.
Answer: C
Explanation:
RSI is considered overbought if it is above 70 and oversold if it is below 30.
NEW QUESTION 210
When does the selling price of long-term debt equal its maturity value?
- A. when the effective interest rate is equal to the nominal interest rate
- B. when the effective interest rate is equal to the market interest rate
- C. when the nominal interest rate is equal to the stated interest rate
Answer: A
Explanation:
When market rate (or the effective rate) of interest is equal to the stated interest rate, the bonds will sell for their face value (maturity value).
NEW QUESTION 211
The expected value of a random variable is:
- A. the probability-weighted average of the possible outcomes of the random variable.
- B. the positive square root of the variance.
- C. a measure of dispersion.
Answer: A
Explanation:
The expected value of a random variable is the probability-weighted average of the possible outcomes of the random variable.
NEW QUESTION 212
The purchase of treasury stock
- A. increases total stockholders' equity and increases the number of outstanding shares.
- B. affects a company's legal capital.
- C. None of these.
Answer: C
Explanation:
The purchase of treasury shares decreases total stockholders' equity. It also decreases the number of outstanding shares but does not affect a company's legal capital.
NEW QUESTION 213
Regarding the disclosure requirements for intangible assets, which piece of information is required by
IFRS but not by U.S. GAAP?
- A. Whether the useful lives are indefinite or finite.
- B. Accumulated amortization expense.
- C. Gross carrying amount.
Answer: A
Explanation:
IFRS then have different requirements for intangible assets with indefinite or definite lives.
NEW QUESTION 214
Key steps in the dynamic process of portfolio management are:
I). Specification of investor objectives, constraints, and preferences.
II). Asset allocation, portfolio optimization, security selection, implementation, and execution.
III). Determination of capital market expectations.
IV). Measurement of portfolio performance.
The order of these steps in the process is:
- A. I, III, II, IV.
- B. I, II, III, IV.
- C. III, I, IV, II.
Answer: A
NEW QUESTION 215
An individual asset's relative systematic risk is calculated based on the:
- A. Security market line.
- B. Capital market line.
- C. Efficient frontier.
Answer: A
Explanation:
An individual asset's relative systematic risk is calculated based on the Security Market Line.
NEW QUESTION 216
Taxable temporary differences result in a deferred tax ______ when the tax base of an asset is
_ ____ than its carrying amount.
- A. liability, more.
- B. liability, less.
- C. asset, less.
Answer: B
Explanation:
Or when the tax base of the liability exceeds its carrying amount.
NEW QUESTION 217
If you observe that number of building permits has increased steadily over the past 2 quarters, it is highly likely that an upturn:
- A. will occur sometime into the future.
- B. is just about to occur.
- C. has occurred.
Answer: A
Explanation:
This gauge is a leading indicator. It foretells new construction activity.
NEW QUESTION 218
A manufacturer of light bulbs claims that the distribution of the light bulb life span has a mean of 60 hours and a standard deviation of 4 hours. The competition decides to check this claim by purchasing 30 light bulbs and testing them to determine the life span of the light bulbs. If the manufacturer's claim is true, how will the sampling distribution of the 30 light bulbs compare to the reported population distribution?
- A. The sampling distribution will be approximately the same as the population distribution, skewed if the population is skewed, normal if the population is normal.
- B. The sampling distribution will be approximately normal with a mean of 60 hours.
- C. The sampling distribution will have a standard deviation of 4 hours.
Answer: B
NEW QUESTION 219
The value of an option-free, 10-year, 7.5% coupon bond is $1,035. A bond indenture specifies terms of the put privilege, the put privilege having a value of $12.25. The value of the putable bond is:
- A. $1,047.25
- B. $1,035
- C. $1,022.75
Answer: A
Explanation:
The value of a putable bond is equal to the value of a similarly defined option-free bond plus the value of the put option.
NEW QUESTION 220
Which of the following is a form of internal credit enhancement?
- A. A corporate guarantee or a letter of credit
- B. MBIA municipal bond insurance or Municipal bond insurance "wrap".
- C. Senior/subordinate debt structures
Answer: C
Explanation:
The senior/subordinate debt structure is an example of an internal credit enhancement. It is common for issuers of debt securities to employ means designed to enhance the credit rating of their debt.
There are two general types of credit enhancement - internal and external. External credit enhancement usually comes in the form of bond insurance, a letter of credit, or a corporate guarantee. Internal credit enhancements typically are employedina more complicated form, and include reserve funds, over collateralization, and the senior/subordinate structure of debt securities. MBIA stands for "Municipal Bond
Insurance Association," an insuring body that caters to the municipal bond market. Any form of bond insurance is frequently referred to as a "wrap."
NEW QUESTION 221
In terms of CFA Institute's Standards of Professional Conduct when dealing with the procedures for compliance per Standard IV (A): Loyalty to Employer, which of the following ways is NOT effective methods for member compliance? Members:
- A. Seeking other employment should not take any records or files to the new employer without the written permission of the employer.
- B. Acting independently of their employer need not disclose to clients the identity of the member's employer.
- C. Seeking other employment should not contact existing clients or potential clients prior to leaving their employer.
Answer: B
Explanation:
A member should also disclose to prospective clients the identity of his employer, and clarify that he is working independently of his employer, and even state the fees that the employer would charge for a similar service.
Members seeking other employment should not contact existing clients or potential clients prior to leaving their employer. In addition they should not take any records or files to the new employer without the written permission of the employer.
NEW QUESTION 222
A cup contains 4 pennies and 6 dimes. Three coins are selected with replacement from the cup.
What is the probability that exactly 2 of the coins selected were pennies?
- A. 0.712
- B. 0.288
- C. 0.432
Answer: B
Explanation:
Since this is sampling with replacement, we use the binomial distribution with n = 3 and pai =
2 1
0 .4 so from the table p(2) = 3!/[1! x 2!] x 0.4 x 0.6 = 0.288.
NEW QUESTION 223
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