CFA-Level-I Pre-Exam Practice Tests | (Updated 2200 Questions)
Valid CFA-Level-I Exam Q&A PDF - One Year Free Update
NEW QUESTION 632
Gains or losses from extraordinary items should be shown on the income statement
- A. as an item in other revenues and expenses.
- B. after discontinued operations.
- C. immediately following income from continuing operations.
Answer: B
Explanation:
Discontinued operations are shown immediately following income from continued operations.
Gains or losses from extraordinary items should be shown on the income statement after discontinued operations.
NEW QUESTION 633
A decrease in resource prices will ____ short-run aggregate supply and ____ long-run aggregate supply.
- A. increase, increase.
- B. increase, does not affect.
, - C. does not affect, increase
Answer: B
Explanation:
The size of the economy's resource base changes the long-run aggregate supply, and resource prices change the short-run aggregate supply. Unless the lower prices of resources reflect a long-term increase in the supply of resources, they will not alter long-run aggregate supply.
NEW QUESTION 634
Empirical probability is:
- A. a technique where current information is used to determine the probabilities in future.
- B. a form of probability that takes into account the fact that some other event has occurred which is likely to affect the chance of our event occurring.
- C. a technique where past information is used to determine the probabilities in future.
Answer: C
Explanation:
Empirical probability is a technique where past information is used to determine the probabilities in future.
NEW QUESTION 635
Date Quantity Per Unit Total Cost Jan 1, Beginning Inventory 100 $18.00 $ 1,800.00 Mar 4, Purchase
4 00 19.00 7,600.00 May 8, Purchase 800 18.25 14,600.00 Nov 3, Purchase 500 20.40 10,200.00
Merchandise Available 1,800 34,200.00
Five hundred units are unsold. Using the average cost method under a periodic inventory system, how much is the cost assigned to the ending merchandise inventory?
- A. $ 9,500
- B. $ 9,400
- C. $ 9,800
Answer: A
Explanation:
Using the average cost method, the ending inventory would be calculated as: $34,200 /
1 ,800 = $19 per unit cost. 500 X $19 = $9,500.
NEW QUESTION 636
Which of the following can be considered as unusual or infrequent items?
I). Gains or losses from disposal of a portion of a business segment. II Gains or losses from sales of assets
II). Gains or losses from sales of assets.
III). Provisions for environmental remediation.
IV). Impairments and write-offs.
- A. I, II, III and IV.
- B. I, II and IV.
- C. I, II and III.
Answer: A
Explanation:
The following can be considered as unusual or infrequent items:
Gains or losses from disposal of a portion of a business segment.
*
Gains or losses from sales of assets.
*
Provisions for environmental remediation.
*
Impairments and write-offs.
*
NEW QUESTION 637
Suppose that the probability that Company AirCo gets a government contract to produce military jets is 0.65 and the probability that AirCo lays off 5,000 employees if they don't get the contract is 0.80. What is the probability that AirCo does not get the government contract and lays off 5,000 employees?
- A. 0.280
- B. 0.520
- C. 0.438
Answer: A
Explanation:
Let A denote the event that AirCo does not get the government contract and B denote the event that 5,000 AirCo employees are laid off. The probability of A is P(A) = 1 - 0.65 = 0.35 and the probability of B given A is P(B|A) = 0.8. The probability of A and B is P(AB) = P(B|A) P(A) = 0.80 x 0.35 =
0 .28.
NEW QUESTION 638
By adding stocks to a portfolio that are less than perfectly correlated with stocks in the portfolio you:
- A. will retain market risk.
- B. can eliminate all variability.
- C. can eliminate the variability due to macroeconomic factors.
Answer: A
Explanation:
Adding stocks to a portfolio that are less than perfectly correlated with stocks in the portfolio will diversify away some, but not all unsystematic risk. However, market or systematic risk will not be diversified away.
NEW QUESTION 639
In 2008 an American taught spoken English in China and he made $30,000 that year. When he came back to the US he brought with him $25,000 home and then bought a new computer for $2,000 and an used car for $12,000. He then deposited the rest of the money in his bank account. Through the series of transactions the amount counted towards US GDP should be:
- A. 2,000.
- B. 14,000.
- C. 0, since he did not make the money in the US.
Answer: A
Explanation:
The income was not generated within the borders of the United States. However, the purchase of a new computer counted towards US GDP but the purchase of the used car did not.
NEW QUESTION 640
The less reliable a source, the ______ likely the information provided would be considered ______.
- A. more, material.
- B. less, non-public and material.
- C. less, material.
Answer: C
Explanation:
The source or relative reliability of the information determines materiality. The less reliable a source, the less likely the information provided would be considered material.
NEW QUESTION 641
A decrease in the inventory turnover may mean:
I). more inventory is on hand and is not moving through manufacturing and being sold.
II). a change in the company's product mix.
III). the company is reducing its risk of inventory stock-outs.
- A. I and III.
- B. I only.
- C. I, II and III.
Answer: C
NEW QUESTION 642
Equity real estate investment trusts are evaluated using common stock analysis techniques because:
- A. they offer a return in the form of an ongoing stream of income with the potential for capital appreciation
- B. REITs trade on stock exchanges and over-the-counter markets as stocks do
- C. real estate markets tend to move in tandem with stock markets over time
Answer: A
Explanation:
Equity REITs are valued using stock valuation techniques because they offer return streams that are similar in nature to those offered by equities, i.e. income and price appreciation.
NEW QUESTION 643
An example of risk-free lending is:
- A. keeping currency in a wall safe.
- B. getting a margin loan from a stock broker.
- C. purchasing T-bills.
Answer: C
Explanation:
Purchasing T-bills is effectively lending the U.S. government money, which is riskless due to the ability of the government to always pay off its loans - at least nominally.
NEW QUESTION 644
Kevin Pol is an independent research analyst who identifies various opportunities for various companies in the market and receives a fee for doing this. He currently researches general equities and debts for PLU Brokerage House for a flat fee. He has recently identified a fantastic opportunity in the debt area. Kevin sells this opportunity to LOY Brokerage House for a fee. PLU is now upset with Kevin for not bringing this debt opportunity to them, and accuses him of violating the Code and Standards. Is this so?
- A. Yes, since Kevin was providing PLU with general equity research he should bring all research to them first and only then take it to other Brokerage Houses.
- B. No, since Kevin was currently providing PLU general equity research and not debt research, plus he is an independent analyst.
- C. This will depend on whether or not Kevin had a specific agreement with PLU to provide ALL research to them. If this is the case then Kevin has violated this Standard. If no specific agreement is in place to provide all types of research to PLU then Kevin has NOT violated this Standard.
Answer: C
Explanation:
Since Kevin is an independent analyst his duty to the various parties that he provides research to will depend on the contracts that he has in place with them. If Kevin had a specific agreement with PLU to provide ALL research to them, then he must bring ALL research to them first. If Kevin had no specific agreement is in place to provide all types of research to PLU then Kevin will only need to bring them the research that he contracted to provide them with.
NEW QUESTION 645
Assuming everything else remains the same, when a stock goes ex-rights its price should:
- A. Increase
- B. Decrease
- C. Remain the same
Answer: B
NEW QUESTION 646
The closing price today for a security was $20. It was $18 20 days ago.
- A. This is a sell signal based on the ROC oscillator.
- B. No decision can be made without considering the general trend first.
- C. This is a buy signal based on the ROC oscillator.
Answer: B
Explanation:
Like all technical indicator, the rate-of-change oscillator should be used in conjunction with other aspects of technical analysis.
NEW QUESTION 647
What is the interest rate risk, in percentage price change, of a semiannual-pay 9%, 15-year bond with an 8.5% yield if rates decrease by 50 and 75 basis points?
- A. 4.28%; 6.51%
- B. -2.12%; -4.31
- C. -4.00; -3.875%
Answer: A
Explanation:
Current price = 104.19. Full Valuation at -50 basis points = 108.65; +4.28%. Full Valuation at
-75 basis points = 110.97; +6.51%.
NEW QUESTION 648
If a purely competitive firm seeks to maximize profit, the firm should
- A. choose the output where per-unit profit is greatest.
- B. increase output whenever marginal cost is less than average total cost.
- C. increase output whenever price exceeds marginal cost.
Answer: C
Explanation:
The purely competitive firm maximizes profit when price is equal to marginal cost. If marginal cost is below price, the firm should expand output until marginal cost rises enough to be equal to price.
NEW QUESTION 649
An estimator whose limit (as the sample size approaches infinity) is the parameter it is intended to estimate is called:
- A. Consistent.
- B. Unbiased.
- C. Reliable.
Answer: A
Explanation:
An estimator is called consistent if the accuracy (of measuring the parameter) increases as the sample size increases. As the sample size goes to infinity, the resulting estimate is the population parameter.
NEW QUESTION 650
Option-free bonds are primarily characterized by ______ between ______ and price.
- A. an inverse relationship; yield
- B. a direct relationship; yield
- C. a direct relationship; maturity
Answer: A
NEW QUESTION 651
A portfolio is comprised of the following three bonds:
Bond | Maturity | Coupon | Duration | Weight
Bond A |22 | 6% | 9.1 | 20% Bond B | 17 | 7% | 7.5 | 50% Bond C |8 | 8% | 3.3 | 30%
What is the change in portfolio value if the yields increase by 80 basis points for all three bonds?
- A. -2.25%
- B. -5.25%
- C. 2.25%
Answer: B
Explanation:
%* Portfolio Value = wA DA *rA + wB DB *rB + wC DC *rC = 0.2 * -9.1 * 0.008 + 0.5 * -7.5
* 0.008 + 0.3 * -3.3 * 0.008 = -5.25%.
NEW QUESTION 652
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. inventory period.
- C. operating cycle.
Answer: C
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 653
A company can determine if its ______ objective has been met by evaluating its ability to pay bills when due and meet unexpected needs for cash.
- A. profitability.
- B. long-term solvency.
- C. liquidity.
Answer: C
NEW QUESTION 654
The short run supply curve for a firm is
- A. the rising part of its average variable cost curve.
- B. the marginal cost curve that lies above the average variable cost curve.
- C. the marginal cost curve that lies above the average total cost curve.
Answer: B
Explanation:
In the short run a firm will not operate if the price were below its average variable cost as it would be losing money. Thus, its short run supply curve will be its marginal cost curve that lies above the average variable cost curve.
NEW QUESTION 655
An investor is considering a 20-unit apartment building that is 10 years old and in excellent condition.
The purchase price is $700,000 with the land being valued at $50,000. The investor plans to sell the property after 4 years and anticipates paying selling costs of 6% of the sales price. The value of the property is expected to increase 2.5% annually over the 4-year holding period. The property is depreciated using the straight-line method over 27.5 years. The investor is in the 28% marginal income tax bracket and faces a 20% capital gains tax rate. The taxable gain/loss and capital gains tax due on the sale of the property at the end of year 4 would be closest to:
- A. $144,550 and $28,910
- B. $48,920 and $9,784
- C. $120,853 and $24,170
Answer: C
Explanation:
The taxable gain/loss and taxes due on the sale would be computed as follows:
NEW QUESTION 656
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