Pass CFA CFA-Level-I Exam With Practice Test Questions Dumps Bundle
2022 Valid CFA-Level-I test answers & CFA Exam PDF
NEW QUESTION 850
Which best describes venture capital?
- A. Venture capital is financing for privately held companies, typically in the form of equity and/or long-term debt.
- B. Venture capital is in the form of equity.
- C. Venture capital is typically a secondary form of financing, after bank financing.
Answer: A
Explanation:
Venture capital becomes available when financing from banks and public debt or equity markets is either unavailable or inappropriate.
NEW QUESTION 851
If the intersection of aggregate demand and short-run aggregate supply is to the left of long-run aggregate supply, and there is no shift in aggregate demand, in the long run the resource prices will
_ _____ and short-run aggregate supply will ______.
- A. decrease, decrease.
- B. increase, increase.
- C. decrease, increase.
Answer: C
Explanation:
The economy is in a recession since its short-run equilibrium is less than the long-run capacity. This will lead to falling resource prices, and thus an outward shift of the short-run aggregate supply curve until full employment output is restored at the intersection of the aggregate demand curve and the long-run aggregate supply curve.
NEW QUESTION 852
For random variable X from a binomial random variable with parameters N and p, we can approximate a probability such as P(X 2) with a normal distribution provided _______.
- A. Np > 5 and N(1 - p) > 5
- B. Np 5
- C. N > 30
Answer: A
Explanation:
To approximate a binomial probability such as P(X 2) with a normal distribution we must have Np > 5 and N(1 - p) > 5. Also, we can improve the approximation by making an adjustment for continuity. For P(X > 2) where x is binomial we would find P(X > 2.5) where x is normal.
NEW QUESTION 853
Which statement is true?
- A. The construction of a peer group is an objective process.
- B. A company may belong to different industries.
- C. Succeeding in an industry with low barriers is easy.
Answer: B
Explanation:
A company may engage in more than one significant business activity. A is false: barriers to entry are not barriers to success. C is false: it is a subjective process.
NEW QUESTION 854
SEC rule 12b-1 allows managers of certain funds to use a portion of the fund's average net assets every year for ___________expenses.
- A. administrative
- B. marketing and distribution
- C. operating
Answer: B
Explanation:
SEC rule 12b-1 allows funds to use a portion of assets under management for selling and promotional expenses associated with marketing and distributing fund shares.
NEW QUESTION 855
John has a LONG position in 20 October copper futures contracts. If he sells 20 October copper futures contracts, he will have closed his futures position by:
- A. exchange-for-physicals (EFP)
- B. offset
- C. delivery
Answer: B
Explanation:
By selling an identical number of identical contracts, John has canceled out or offset his
LONG position.
NEW QUESTION 856
An acceptable current ratio for a company in Industry A is 2:1. If a company in that industry has a current ratio of 1.5:1, then
- A. company must make changes to achieve a 2:1 current ratio.
- B. company must improve its debt paying ability.
- C. ratio must be investigated further.
Answer: C
Explanation:
If a company's current ratio falls outside the norm, it should be investigated further. A company with a current ratio higher than 2:1 may have inventory or accounts receivable that are too large or poor cash management, while a company with a current ratio less than 2:1 may not. For this reason, all standards for evaluating financial performance should be used with care.
NEW QUESTION 857
The CEO of a large brokerage house informs one of the analysts that he should change his opinion from a "sell" to a "buy" on company RDE, since the CEO of RDE is a good friend of the CEO of the brokerage firm, and is not happy with the sell recommendation out on his company. What should the analyst do?
- A. have his supervisor review the opinion, and then make the change to a "buy", if the supervisor agrees.
- B. refuse to report on the company any further.
- C. refuse an opinion on the company and only release factual information about the company.
Answer: C
Explanation:
Members shall use reasonable care and judgment to achieve and maintain independence and objectivity in making investment recommendations or taking investment action. Consequently the analyst should not change his opinion to a buy, irrespective of whether his supervisor reviews the report.
NEW QUESTION 858
If nonrecurring charges are really prior year expenses taken too late, then the practice of ignoring nonrecurring charges and focusing on recurring operating income results in
- A. an underestimation of the firm's assets.
- B. an overestimation of the firm's assets.
- C. an overestimation of the firm's earnings trend.
Answer: C
Explanation:
If nonrecurring charges are really prior year expenses taken too late, then the practice of ignoring nonrecurring charges and focusing on recurring operating income results in an overestimation of the firm's earnings trend.
NEW QUESTION 859
Choose the correct statement.
- A. We can never conclude that a portfolio is better than the market portfolio or not by looking at the portfolio's Sharpe ratio or Treynor ratio only.
- B. A portfolio with a Treynor ratio of 1 is better than the market portfolio.
- C. A portfolio with a Sharpe ratio of 2 is better than the market portfolio.
Answer: A
Explanation:
We can, however, compare the ratios of the portfolio and the market portfolio to draw a conclusion.
NEW QUESTION 860
We would like to refer all probability statements to one set of normal probability values. The distribution hat fills this role is known as the
- A. binomial distribution.
- B. standard normal distribution.
- C. continuous uniform distribution.
Answer: B
Explanation:
We would like to refer all probability statements to one set of normal probability values. The distribution hat fills this role is known as the standard normal distribution.
NEW QUESTION 861
If a firm has a monopoly over the sale of photographic paper and seeks to maximize profits, then:
- A. it will set the price of the product so that its marginal revenue equals its marginal cost.
- B. it adjusts the price of the product until demand becomes perfectly inelastic.
- C. it will set the price of the product equal to the marginal cost of production.
Answer: A
Explanation:
Unless this is true, the monopolist will be able to increase profits by either increasing or decreasing price.
NEW QUESTION 862
In an inverse head-and-shoulders pattern, the low price reached at the bottom of the head is $40 and the neckline is established at $50. The price objective for a technician would be:
- A. $30.
- B. $60.
- C. $45.
Answer: B
Explanation:
50 + (50 - 40) = 60.
NEW QUESTION 863
If marginal cost is greater than average total cost, then:
- A. average total cost will not change.
- B. average total cost is rising.
- C. average total cost is falling.
Answer: B
Explanation:
If marginal cost exceeds average total cost, then average total cost must be increasing since the cost of the last unit exceeds the average cost of all previous units.
NEW QUESTION 864
Assuming all other factors remain unchanged, which one of the following would reduce a firm's price/earnings ratio?
- A. Investors become less risk averse.
- B. The yield on Treasury bills increases.
- C. The dividend payout ratio increases.
Answer: B
NEW QUESTION 865
In a large metropolitan area, past records revealed that 30 percent of all the high school graduates go to college. From 20 graduates selected at random, what is the probability that exactly 8 will go to college?
- A. 0.231
- B. 0.114
- C. 0.400
Answer: B
Explanation:
This is a binomial probability. The probability of getting r successes out of n trials where the probability of success each trial is p and probability of failure each trial is q (where q = 1-p) is given by:
r (n-r)
n!(p )[q ]/[r!(n-r)!]. Here n = 20, r = 8,p = 0.3 and q = 0.7.
8 12
Therefore we have 20!(0.3 )(0.7 )/[8!12!] = 0.114.
NEW QUESTION 866
At the beginning of this year Aramed had 400,000 shares of common stock outstanding. Aramed paid a 10 percent stock dividend on March 31 of this year. Aramed issued 90,000 new common shares on
June 30 of this year and repurchased 12,000 shares on December 1. The number of shares Aramed should use in computing earnings per share at the end of the year is:
- A. 484,000.
- B. 476,000.
- C. 475,000.
Answer: A
Explanation:
Weighted Average Shares = Dividend Paid to shares prior to date = 400,000 * 1.1 = 440,000
Newly issued shares = 90,000 * .5 = 45,000 Repurchased shares = 12,000 * 1/12 = 1000. 440,000 +
4 5,000 - 1000 = 484,000.
NEW QUESTION 867
Which of the following statements describing options is FALSE?
- A. A call option will be exercised only if the market value of the underlying asset is more than the exercise price.
- B. A put option holder's profit increases when the value of the underlying asset increases.
- C. A put option will be exercised only if the market value of the underlying asset is less than the exercise price.
Answer: B
NEW QUESTION 868
An analyst has gathered the following information about a company:
Balance Sheet
Assets Cash 100 Accounts Receivable 750 Marketable Securities 300 Inventory 850 Property, Plant &
Equip 900 Accumulated Depreciation (150) Total Assets 2750
Liabilities and Equity Accounts Payable 300 Short-Term Debt 130 Long-Term Debt 700 Common Equity
1 000 Retained Earnings 620 Total Liab. and Stockholder's equity 2750
Income Statement
Sales 1500 COGS 1100 Gross Profit 400 SG&A 150 Operating Profit 250 Interest Expense 25 Taxes 75
Net Income 150
What is the inventory turnover ratio?
- A. 1.59.
- B. 0.77.
- C. 1.29.
Answer: C
Explanation:
Inventory turnover = 1100(COGS)/850(inventory) = 1.29
NEW QUESTION 869
Which of the following assumptions does the Gordon growth dividend discount model require?
I). Dividends grow at a constant rate.
II). The dividend growth rate continues indefinitely.
III). The required rate of return is less than the dividend growth rate.
- A. I, II and III.
- B. I and II only.
- C. I only.
Answer: B
NEW QUESTION 870
The actual yield to maturity earned at the end of the bond's life may differ from the expected yield to maturity at purchase because of:
- A. interest volatility
- B. interest rate risk
- C. reinvestment rate risk
Answer: C
NEW QUESTION 871
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